Stock futures fall, oil again above $100 amid sanctions

Will Horner | UPDATED March 01, 2022 08:55 AM EST

Russian ruble jumps after heavy fall

Global stock and bond yields slipped, while oil prices rose for several years, as Russia’s invasion of Ukraine continued to rip through the markets.

Futures tied to the S&P 500 fell 0.3%. Blue-chip Dow Jones Industrial Average futures also fell 0.3%, while the technology-heavy Nasdaq-100 futures fell 0.4%.

In Europe, the pan-continental stokes Europe 600 fell 1.2%. Stocks linked to Russia’s economy were the hardest hit, with Austria’s Raiffeisen Bank, which has larger operations in Ukraine and Russia, down 9%. Polymetal International, a London-listed firm with gold mines in Russia, was down nearly a quarter in the past two days, taking its losses to more than 75%. Arms manufacturers were among the best performers.

There was demand for safe-haven assets, gold prices were rising and government bond yields were falling. The yield on the benchmark 10-year US Treasury note fell from 1.836% on Monday to 1.783% on Tuesday. Yields on German government bonds fell into negative territory for the first time since January. Gold prices rose 0.9%.

Oil prices rose above $100 a barrel to hit their highest level since 2014. International oil benchmark Brent crude rose 5% to $103.11 a barrel. Benchmark European natural gas prices jumped more than 13%. Members of the International Energy Agency may agree as early as Tuesday to release supplies from oil reserves in an effort to rein in rising crude prices.

Shares of energy companies rose more than 2% in premarket trading along with oil prices, along with Occidental Petroleum and Devon Energy. Meanwhile, shares of Target were up more than 12% after reporting strong sales during the holiday period. Albertsons rose more than 9% after the supermarket chain said it had begun a strategic review. The weekday gained more than 8% after reporting earnings late Monday, which beat estimates.

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 the resulting sanctions. Limited supplies of Russian goods could exacerbate already heightened inflation, but investors expect the overall impact on the world’s largest economies to be muted.

Ceasefire talks have so far failed to produce concrete results, but investors have welcomed the fact that they have begun. Nevertheless, Moscow is expected to speed up its attacks on major Ukrainian cities and is pouring manpower and equipment into the country.

“I’m not sure what we’ll see from the talks, but no stone will be left unturned on the ground because Putin will have something to show for this war,” said Honey Redha, portfolio manager at Pinebridge Investments. “You will only see stronger resolve from Russia.”

The geopolitical crisis came at a time when market sentiment was already fragile. Economies are facing the highest inflation in several decades, increasing pressure on central banks to raise interest rates. Investors are trying to figure out how the fighting in Ukraine could affect the outlook of central bankers.

Mr Redha said the conflict could put inflation under pressure even more by threatening to limit Russian exports of oil and gas. Russia is the single largest gas exporter and major supplier of crude oil.

Russian markets have been hit hard by the invasion and ensuing sanctions, with investors turning to Russian stocks. A sharp, sudden interest rate hike from the country’s central bank helped pluck the ruble.

After falling nearly 30% on Monday, the Russian ruble on Tuesday recovered more than 6% of its value against the dollar. Market-data services have shown limited price updates this week, which suggests some trading is taking place. Russia’s stock market remained closed after falling last week.

The London Stock Exchange suspended trading in Russia’s shares of VTB Bank after it said the Bank of New York Mellon had resigned as a depository for the company. JPMorgan Chase also halted trading of the two funds due to the crisis in Ukraine.

Later in the day, investors will look to the Institute for Supply Management’s survey of purchasing managers, which is expected to show that US factory activity continued to rise in February as the Omicron wave faded.

Stock markets in Asia Pacific were mixed. Japan’s Nikkei 225 rose 1.2%, while Hong Kong’s Hang Seng index rose 0.2%.