PARIS (Reuters) – Wall Street is expected to fall and European stock markets are down sharply mid-session on Monday after new Western sanctions against Russia and the placing on “combat alert” of Moscow’s nuclear deterrent force, which encourage investors to fall back on the assets deemed to be the safest, while commodity prices are still rising.
Futures contracts on the main New York indices point to a decline of 1.31% for the Dow Jones, 1.41% for the Standard & Poor’s 500 and 1.26% for the Nasdaq.
Paris, the CAC 40 lost 3.06% to 6,546.06 points around 12:00 GMT and erased almost all of its rebound on Friday. In London, the FTSE 100 cde 1.21% and Frankfurt, the Dax fell by 2.31%.
The EuroStoxx 50 index is down 3%, the FTSEurofirst 300 1.36% and the Stoxx 600 1.3%.
The markets therefore continue to sway according to the development of the military conflict between Ukraine and Russia and the political and economic upheavals it causes. The CBOE’s Vix volatility index (+19.28%) thus rose again sharply, like that which reflects the volatility of the EuroStoxx 50 (+21.16%).
The hope of seeing the negotiations opened this morning between Ukrainians and Russians lead to a concrete result is very limited, and investors are worried about the consequences of the conflict and Western sanctions on economic growth, business activity, the liquidity of markets or rising prices.
The exclusion of most Russian banks from the international SWIFT system, the partial freezing of the Russian central bank’s reserves and the restrictions on air traffic, among other things, struck a chord.
“The new sanctions announced on Saturday (…) are even more severe and broader than the most extreme that we had envisaged only a month ago”, note in a note the economists of JPMorgan in charge of emerging countries, underlining global repercussions, mainly through commodity prices.
The American bank no longer excludes seeing the price of a barrel of oil reach 150 dollars, stressing that this could both slow down growth and boost inflation.
In Russia, the authorities have given up opening the Moscow Stock Exchange after the ruble fell again, which lost more than 30% against the dollar and hit a new historic low before the central bank raised its key rate to 9.5% 20%.
VALUES IN EUROPE
In Europe, the banking sector is the hardest hit by the general downturn after the exclusion of most Russian banks from the international SWIFT system, which primarily affects institutions present in Russia.
The Stoxx sector index fell 5.69%, the lowest since December; the Austrian group Raiffeisen Bank fell by 13.36%, the French Socit Generale by 10.61%, the Italian UniCredit by 11.91%.
The automobile compartment dropped 5.29%, with declines of 11.43% for Renault, 8.52% for Faurecia and above all 22.71% for the Finnish tire manufacturer Nokian Tyres, of which 80% of the production is based in Russia and which has given up its results objectives.
On the rise, defense stocks are benefiting from the decisions taken this weekend by the European Union to support Ukraine and from Germany’s announcement of a sharp increase in its military budget: Thales gains 12.04 %, Dassault Aviation 8.27%, BAE Systems 13.17% and Rheinmetall 25.22%.
RATE
Yields on US Treasuries fell, as a result of the decline in safe-haven securities and the downward revision of interest rate expectations given the geopolitical context.
That of ten-year Treasuries thus yields almost seven basis points to 1.9165% and the two-year almost eight points to 1.498%.
On the European market, the ten-year German returned 0.198%, down more than two points.
Money markets are now pricing just over 10% on the probability of a half-point hike in the Federal Reserve’s fed funds rate on March 16, up from over 20% last week. , according to CME data.
CHANGES
Despite the evolution of the prospects for a rate hike, the dollar remains on the rise against the other major currencies (+0.42%), taking advantage of its status as a safe haven.
The yen and the Swiss franc are also surrounded, while the euro fell sharply against the greenback (-0.65%), 1.1194, traders fearing the economic cost of sanctions against Russia for the countries of the euro zone, which could force the European Central Bank to slow down the tightening of its monetary policy.
PETROLEUM
The price of a barrel is once again on a sharp rise, the desire of Western countries to economically isolate Russia rekindling fears of tensions on the world supply of crude, especially as OPEC + has revised down its forecast for world surplus for this year.
Brent gained 4.67% to $102.50 a barrel and US light crude (West Texas Intermediate, WTI) 4.87% to $96.05.
Goldman Sachs raised its one-month forecast for Brent to $115 a barrel from $95 previously.
METALS
Risk aversion and the risk of a drop in supply support gold prices, up 0.91% to 1,904.8 dollars an ounce, like palladium (+ 4.34%), key component of catalytic exhaust pipes and of which the Russian group Nornickel is the world’s leading producer.
NO MAJOR ECONOMIC INDICATOR THE AGENDA OF THE DAY
(Written by Marc Angrand, said by Blandine Hnault)
by Marc Angrand