After the astonishing rebound of stocks on Friday, guided by the prospect of a conflict not very destabilizing for the world economy, things are getting more complicated this morning. Wall Street opened much lower, with the S&P 500 down 1.0%, the Dow by 1.0% and the Nasdaq by 0.8%.

Investors thought that sanctions against Russia would be mild and that money would continue to flow to invest in everything and anything. But the Ukrainian population made things much harder for the Red Army than Putin anticipated, while European leaders stepped up their game and brought out the heavy artillery of economic sanctions. The narrative has changed, and it's a powerful narrative: we're talking about resistance, and an exemplary Ukrainian president.

Sanctions include the freezing of reserves held by the Russian Central Bank abroad, the exclusion of some Russian banks from the SWIFT system (not all of them, to keep the channel for energy purchases open) and the banning of Russian planes from European airspace.

The EU will finance the purchase of weapons for Ukraine and even Germany announced a doubling of its military spending. Many other targeted retaliatory measures have been taken.

This weakening of Russia's position has prompted Vladimir Putin to put his nuclear deterrent on alert. No one really wants to speculate whether this is a bluff or not. The Russian Central Bank has banned the sale of shares by foreigners and has put in place several emergency measures to prevent the country's financial system from breaking up. It has also just raised its main policy rate from 9.5% to 20%. Most of its foreign exchange reserves are held in Russia, but about 15% are now frozen abroad.

At the same time, talks are scheduled between Russian and Ukrainian delegations at the Belarusian border. But Minsk, which is at the Kremlin's beck and call, has also opened new fronts in the north of the country. In this context, Beijing's position is important. The Financial Times spoke of a "pro-Russian neutrality", but the lines have moved a little over the weekend. Two Chinese state-owned banks have started to reduce their financing of Russian commodities, officially as part of a risk management policy.

Companies have also started to react. Two emblematic decisions have already been announced. Firstly, the British oil giant BP Plc is withdrawing from the capital of its Russian counterpart Rosneft, in which it holds just under 20%. BP will write down $25 billion in value on this transaction. The Norwegian sovereign wealth fund (Norges Bank Investment Management) is also going to divest its investments in Russian companies.

On financial markets, the latest developments are causing oil and agricultural commodity prices to soar. On Wednesday we will hear from Fed boss Jerome Powell, who is scheduled to appear before U.S. lawmakers for a semi-annual review. There will also be an Opec+ meeting on Wednesday, which looks lively as the oil cartel is led by Russia, and Saudi Arabia has made it clear to the West that it does not intend to boycott its partner. The tightening of sanctions also caused the ruble to plunge. The Russian currency sank by 28% against the greenback, to RUB 107.50.

 

 

Economic highlights of the day:

In the United States, January wholesale inventories and the Chicago PMI for February are on the agenda.

The dollar is down 0.3% to 0.8911. The ounce of gold is back above USD 1910. You will need USD 97.50 to purchase a barrel of Brent and USD 94.98 for a barrel of WTI. The yield on 10-year US debt loses 7 points to 1.89%, while the Bund gains 6 points to 0.23%. Bitcoin is trading not far from USD 40,000 a piece.

 

On markets:

* Apple - The U.S. technology giant said in a letter seen by Reuters on Monday that it would comply with a new rule from the Dutch industry authority (ACM) requiring it to open its App Store to alternative payments.

* Exxon Mobil - After BP's withdrawal from Russia, analysts said Monday that pressure could increase on Exxon Mobil, which holds a 30% stake, along with Russia's Rosneft, Japan's Sodeco and India's ONGC Videsh, in the oil and gas fields on Sakhalin Island, off the coast of Siberia.

* Meta Platforms - Facebook's parent company announced Monday that hackers had used its social network to target Ukrainian politicians, military personnel and journalists. Meta Platforms added that it had removed about 40 fake accounts on Facebook and Instagram operating from Russia and Ukraine in the past 48 hours.

* Alphabet - YouTube, the video service of Alphabet subsidiary Google, on Saturday blocked the payment of numerous Russian channels, including the state media RT, following a similar decision by META PLATFORMS. Alphabet also announced that it has temporarily disabled some live information on its Google Maps service in Ukraine.

* Twitter - The social network announced Saturday that some of its users no longer had access to its site in Russia.

* United Parcel Service, Fedex - The two U.S. logistics groups announced a suspension of their delivery services in Russia and Ukraine.

* Bank of America, Citigroup, Goldman Sachs, Morgan Stanley - Sources said Sunday that compliance teams at major U.S. banks had been working through the weekend on new sanctions imposed on Russia and its banking system following Moscow's invasion of Ukraine. Those banks also prepared for possible cyberattacks, their executives and security experts said.

* Chevron - The U.S. company announced Monday that it has bought Renewable Energy Group for $3.15 billion, its largest acquisition in alternative energy. Renewable Energy Group shares jumped more than 37% in pre-market trading.

* First Horizon - The U.S. bank jumped 32.2% in pre-market trading after a $13 billion takeover offer from D Bank Group.

* Intel - The U.S. semiconductor maker has chosen the German city of Magdeburg for its new European chip plant and an official announcement will be made on March 4, a source close to the matter told Reuters.

* Tesla - Panasonic said on Monday it plans to launch mass production of its new lithium-ion battery for Tesla by the end of March 2024. Tesla shares are down 1.7% in premarket trading.

* Nielsen - The market research firm's stock is up 4.2% in premarket trading after the group reported fourth-quarter adjusted earnings per share that beat analysts' expectations.

* Lordstown Motors - The electric vehicle maker is up 1.9% in premarket trading after the group announced a sales forecast this year of about 500 Endurance pickups and then a volume five times that number in 2023.

 

Analyst recommendations:

AstraZeneca: Stifel starts tracking as Buy, targeting GBp 12,300.
Aveva: Jefferies downgrades from hold to underperform with a target of GBp 2,000.
BAE Systems:  Societe Generale lowers to hold from buy. PT down 11% to 667 pence.
Dollar tree: BMO Capital Markets upgrades to outperform from market perform. PT up 21% to $170.
Epam Systems: Piper Sandler downgrades to neutral from overweight. PT up 7.2% to $410.
Ferguson: Jefferies downgrades from buy to hold with a GBp 12,374 target.
First Bancorp.: Raymond James reinstated coverage with a recommendation of outperform. PT up 9.4%.
Foot Locker: Citi cut the recommendation on Foot Locker Inc. to sell from buy.
Gilead Sciences: BMO Capital Markets moves to market perform from outperform. PT up 6.3% to $65.
Jack in the Box: Gordon Haskett downgrades to hold from buy. PT up 10% to $96.
QinetiQ: J.P. Morgan upgrades from Underweight to Neutral with a target of GBp 320.
The TJX Companies: Cowen lowers PT to $72 from $88. Maintains outperform rating.