MARKET WRAPS
Watch For:
U.S. Construction Spending for January; U.S. ISM Report on Business Manufacturing for February; Canada GDP for December; Target Corp. 4Q earnings; Bank of Montreal earnings for 1Q.
Opening Call:
Stock futures slipped following days of whipsaw moves prompted by Russia's invasion of Ukraine.
Oil prices rallied, rising back above $100 a barrel. Members of the International Energy Agency could agree as early as Tuesday to release supplies from oil reserves in an effort to keep a lid on rising crude prices.
Stock indexes around the world have been volatile in recent days as investors attempt to gauge the potential global economic impact from the invasion and resulting sanctions. Constricted supplies of Russian commodities could add to already elevated inflation, but investors hope the overall effect on the world's biggest economies will be muted.
Ceasefire talks have failed to produce concrete results so far, but investors have welcomed the fact that they have begun. Still, Moscow is expected to increase the tempo of its assaults on major Ukrainian cities and is pouring manpower and equipment into the country.
"I am not sure what we will see from negotiations, but on the ground there will be no let up because Putin has to come away from this war with something to show for it," said Hani Redha, a portfolio manager at PineBridge Investments. "You will only see strengthened resolve from Russia."
The geopolitical crisis came when market sentiment was already fragile. Economies are facing the highest inflation in several decades, heaping pressure on central banks to raise interest rates. Investors are trying to gauge how the fighting in Ukraine might influence central bankers' outlooks.
Mr. Redha said the conflict could pressure inflation even more, by threatening to constrict Russian exports of oil and gas. Russia is the single biggest gas exporter, and a major supplier of crude oil. "I would not bet that the Fed is going to change their course," he said. "The first few hikes are almost set in stone at this point."
Russian markets have been dealt a heavy blow by the invasion and the ensuing sanctions, with investors jettisoning Russian stocks. A sharp, sudden interest rate rise from the nation's central bank helped send the ruble tumbling.
Later in the day, investors will view the Institute for Supply Management's survey of purchasing managers, which is expected to show U.S. factory activity continued to rise in February as the Omicron wave faded.
Stocks to Watch:
AMC Entertainment is set to report fourth-quarter results Tuesday, but investors already have a good idea of what to expect. Therefore, the company's quarterly conference call will be worth a listen.
At the start of February, the movie theater chain released preliminary results which included total revenue of about $1.17 billion and a net loss between $194.8 million and $114.8 million. Adjusted earnings before interest, taxes, depreciation, and amortization was forecast between $146.8 million and $151.8 million. Shares of AMC initially soared on that news as investors cheered improvements in the firm's underlying business.
The company's earnings call with analysts may be the most exciting moment. In recent quarters, the firm has taken questions submitted online by individual investors. AMC CEO Adam Aron has leaned into his company's massive base of retail investors, who had rallied together on social media sites hoping to thwart short-sellers who were betting against AMC stock.
Forex:
Worries over the Russia-Ukraine crisis should continue to support safe-haven currencies, but the whole bloc of European currencies looks vulnerable, ING said.
"The U.S. dollar, yen and Swiss franc remain supported in the near term amid lingering uncertainty over the conflict and the impact of sanctions, " ING analysts said in a note.
Among G10 currencies, the Swedish krona, pound and euro are likely to suffer the most if sanctions start affecting the flow of Russian gas into Europe, while the Norwegian krone may rise as a result, they said.
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The Russian ruble recovered some of its recent sharp losses that saw it dive to record lows, but the currency will remain vulnerable to further falls without a clear indication that the Russia-Ukraine conflict could end quickly, MUFG said in a research note.
The forex market "has been more stable overnight" after hefty sanctions imposed on Russia by Western countries, and capital controls and a steep increase in interest rates within Russia.
"Developments on the ground keep risks tilted to the downside for the [ruble] and Central European currencies in the near-term," MUFG said. USD/RUB fell 10% to 96.6826, having spiked above 100 on Monday.
Bitcoin rose as Russians and Ukrainians are relying on the cryptocurrency to get their funds out of the traditional system, Swissquote Bank analyst Ipek Ozkardeskaya said in a note.
Bitcoin purchases using Russian rubles and Ukrainian hryvnias reportedly soared as Russia imposed sanctions on its citizens, she said.
"Being able to transact value in bitcoin also helps Russian oligarchs go around the Western sanctions," she said.
Bitcoin could rise further if there is no policy response from western nations to Russia's adoption of the cryptocurrency but it's questionable how much the West would tolerate the bitcoin interference to its political decisions, she said.
Bitcoin rose 13.4% to $43,487, having reached a one-and-a-half-week high of $44,165 overnight, according to CoinDesk.
Bonds:
The yield on the benchmark 10-Year U.S. Treasury note rose to 1.843% Tuesday from 1.836% Monday.
Eurozone 10-year government bond yields traded lower as investors remain in defensive mode in light of further escalation in the war in Ukraine. "Considering what is at stake, the overall price action still has to be characterized as orderly and contained," said Commerzbank's rates strategists.
Commodities:
Oil prices rallied, with Brent rising back above the $100 a barrel level, as the market awaits an emergency meeting of the International Energy Agency to discuss Russia's invasion of Ukraine.
The meeting will discuss "the impact of Russia's invasion of Ukraine on oil supply and how IEA members can play a role in stabilizing energy markets," the agency's head Fatih Birol said on Twitter.
The IEA's members are considering releasing 70 million barrels of oil from the emergency inventories, the Wall Street Journal reported.
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Western sanctions targeting Russia have sought to carve out the nation's sizable energy exports, but that isn't stopping energy prices from rallying.
European natural-gas futures were up almost 9% at EUR107.75 a megawatt-hour. The sanctions have disrupted energy exports by making businesses reluctant to deal with Russia.
"More and more commodities consumers are reluctant to buy oil, liquefied natural gas, coal, metals and grains from Russia due to the uncertain legal situation," said Commerzbank.
Shipping firms are reluctant to operate in the Black Sea amid naval maneuvers and after some commercial vessels were fired upon. Shipping insurers are also charging higher and higher premiums to operate in the region.
Gold rose as havens continue to be in demand.
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03-01-22 0608ET
