| By Romain Fournier | |
| U.S. stock index futures were slightly up this morning ahead of Jerome Powell’s speech. Investor’s fears grow as uncertainty progress about what the conflict will turn into, and what Putin’s end game is. Will the Kremlin, cornered by international sanctions, take catastrophic decisions? How will this conflict affect international stock markets and inflation? For the time being, economic sanctions against Russia are piling up. | |
| The war in Ukraine caused financial markets to stall again yesterday. By invoking the nuclear threat at the beginning of the week, the Russian president has awakened old demons. The world fears that the master of the Kremlin will turn into Jack Ripper, the paranoid general who triggers the nuclear apocalypse in Stanley Kubrick’s Doctor Strangelove. The S&P500 gave up 1.55% at the bell. The Russian stock market is still closed so that it does not collapse. There is a real paradigm shift with this conflict. I almost want to call it a “black swan” to return to financial theory, as its implications are so vast and difficult to quantify. In the short term, it disrupts the strategies of central banks, which were already hard at work to catch up with inflation. While investors had more or less predicted a 50-basis point rate hike by the U.S. central bank on March 16, the majority of forecasts have fallen back to a rate hike of 25 basis points (94.4% probability, according to CME’s FedWatch tool). Fed boss Jerome Powell is scheduled to appear before U.S. lawmakers in a semi-annual hearing at 10 am ET. Investors will assess each and every word. Brent crude oil and WIT both surpassed USD 110 per barrel and other commodities are on fire, notably agriculture (+17% for the S&P GSCI Agriculture index since January 1) and industry. In the meantime, the West continues to cut ties with Russia at a record pace. Economic, cultural, and digital links are being severed one after the other. BMW and Apple will no longer sell in the country until further notice, while Exxon Mobil which is dropping its partners Rosneft and EN+. Investors are not only affected via indexes. For example, the Austrian bank Raiffeisen, which has a strong presence in Eastern Europe and Russia, has just waived its previously announced dividend. The owners of ruble bonds are trapped since the depositories Euroclear and Clearstream have stopped accepting the Russian currency. The list goes on… Economic highlights of the day: Along with Powell’s speech, German employment figures for February and the ADP report on employment in the United States are the main events of the day. The dollar is up to EUR 0.9012, while the ounce of gold is up to USD 1932 Oil continues to soar: Brent crude is at USD 111.8 and WTI at USD 110.15. US debt is paying 1.74% on 10 years and the Bund is back in negative territory at -0.08%. Bitcoin is trading near USD 44,000. On markets: * Apple announced on Tuesday that it is suspending the sale of all its products in Russia in response to the invasion of Ukraine, while access to some of the group’s services, including Apple Pay, will be restricted in the country. * Google, Alphabet‘s main subsidiary, announced Tuesday that it has removed RT and Sputnik from its Play store mobile app store in Europe after the European Commission decided to ban the two Russian media outlets after Moscow invaded Ukraine. * Exxon Mobil announced on Tuesday night that it would withdraw from its oil and gas business in Russia, valued at more than $4 billion, and cease all new investments following Moscow’s invasion of Ukraine. * Twitter – The social network announced Tuesday that it would comply with European Union sanctions on Russian state media RT and Sputnik when they take effect. * The Boeing Company said Tuesday night it would suspend parts deliveries, maintenance, and technical assistance for Russian airlines amid Western sanctions that isolate Russia’s aviation sector. * Netflix – The U.S. group has made an offer of 65 million euros on the Finnish Next Games, specializing in video games for mobile, announced Wednesday. Netflix shares rose 0.6% in premarket trading. * Ford Motor – The U.S. automaker announced Wednesday the separation of its electric vehicle and internal combustion engine businesses in the face of competition from Tesla. Ford shares gained 0.4% in premarket trading. * Rivian Automotive – The electric vehicle maker, which is 20% owned by Amazon, announced Tuesday that it plans to raise its prices by 20% due to high inflation and rising component costs. Rivian shares are down 1.2% in pre-market trading. * Domino’s Pizza – Credit Suisse lowered its recommendation on the stock to “neutral” from “outperform” after the company reported lower-than-expected fourth-quarter sales and earnings. The stock plunged 14% in pre-market trading. * Salesforce.com reported Tuesday revenue and earnings that beat Wall Street expectations on strong demand for its cloud-based software. The stock was up 4% in after-hours trading. * First Solar – The photovoltaic panel maker fell 16.01% in premarket trading after the company reported a full-year revenue forecast below 2021 levels, and fourth-quarter sales came in below expectations. * AMC Entertainment Holdings – The movie theater operator reported better-than-expected quarterly sales on Tuesday, thanks in part to the success of films such as “Spider-Man: No Way Home” and the latest James Bond movie “Dying Can Wait. The stock is up 1.2% in pre-market trading. Analyst recommendations: Abbott Laboratories: BofA Securities reinstates at buy with a $140 price target. Block: UBS adjusts block price target to $178 from $322, maintains buy rating Booking Holdings: Evercore ISI lifts to outperform from in-line, price target to $2,900 from $2,500 Chevron: DZ Bank raised the recommendation to buy from hold. PT up 12% to $167. Croda: Jefferies maintains a Hold rating with a price target reduced from GBp 8,000 to GBP 7,900. Flutter: JP Morgan remains Overweight with a reduced target of GBP 17,010 to GBp 15,990. Live Nation: Goldman Sachs adjusts price target for live nation entertainment to $145 from $130, maintains buy rating Mattel: UBS adjusts Mattel price target to $35 from $28, maintains buy rating Medtronic: BofA Securities reinstates at buy with $135 price target. Mercantile Bank: Raymond James upgrades to strong buy from outperform. PT up 24% to $44. Progressive: Goldman Sachs downgrades to neutral from buy. PT up 12% to $116. Royal Mail: Liberum downgraded from hold to sell targeting GBP 355. Spectris: HSBC downgrades from buy to hold targeting GBP 2900. The Allstate Corporation: Goldman Sachs raised to buy from sell. PT up 18% to $142. Workday: UBS adjusts workday price target to $275 from $250, maintains buy rating Zoom Video Communications: JPMorgan lowers price target to $295 from $385, maintains overweight rating. Source: Market Screener | |
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