S&P 500
Global Omicron cases as of early March 3, 2022.
The US stock market showed strong growth on Wednesday, even despite the negative background due to the Russia-Ukraine conflict.
US stock indices posted notable gains on Wednesday: Dow +1.8%, NASDAQ +1.6%, S&P500 +1.9%.
In Russia, the Moscow Exchange is still closed today. Trading has been suspended since Monday by the decision of the central bank. Russian authorities are afraid that the market will fall sharply and collateral in the form of stocks will collapse. The central bank will announce its decision on whether to open the trade at 9:00 Moscow time on Friday.
This week, Russia's central bank has raised its key rate to a whopping 20% per annum. This is good news for deposit holders as Sberbank and VTB have significantly raised their deposit rates. On the other hand, such conditions are a huge blow to local businesses that planned to take a loan.
The ruble stopped its fall at around 98 against the US dollar and 115 against the euro. Yesterday, the EU announced a ban on the supply of euro banknotes to Russia. However, these restrictions do not apply to the import and export of the euro to and from Russia for personal purposes. The Russian authorities have limited the export of cash currency from Russia to the amount of $10,000.
Russia - Ukraine: Everyone is waiting for the second round of negotiations that should take place today in Belovezhskaya Pushcha. However, the two sides are unlikely to reach an agreement. Russia demands that Ukraine recognize Crimea as part of Russia, and Luhansk and Donetsk gain autonomy within the borders of the regions and not within the borders that existed for 8 years from 2014 to 2022. This is approximately 3 times more territory. In this situation, even a truce and a ceasefire agreement would be a huge success. During the night, Russia continued to bomb Ukraine with missiles, but the advance of Russian troops into Ukraine has slowed down in recent days. Ukraine continues to fight back. Kyiv and almost all major cities remain under the control of Ukraine. Russia claimed to have taken complete control of Kherson.
Russia has more than $700 million worth of government bond payments coming due in March. In theory, the country has ample reserves to cover the debt, but in practice, a freeze on some assets and other measures could affect its ability to make payments, according to JPMorgan. Moody's has downgraded Russia's rating to B3.
According to the UN, the number of refugees from Ukraine has reached 1 million people in just a week of Russia's military operation. Yesterday, the Russian Ministry of Defense published its first report on causalities, saying that 498 of its troops were killed and 1,500 injured.
Russia has actually introduced censorship in the media. The State Duma is passing a law on criminal punishment for what the Russian authorities consider a "fake" about the military operation in Ukraine. People may face from 3 to 15 years in prison. Russia has already blocked such major media outlets as Dozhd TV and Ekho Moskvy radio.
Japan and Canada fully joined the sanctions against Russia.
Another major global aircraft manufacturer - the Brazilian Embraer - announced the termination of maintenance and supply of spare parts to Russia. Boeing and Airbus have already done this.
Asian markets in the morning: Japanese indices were up by 0.8%, while China's declined by -0.5%.
Energy: In the past three days, oil surged to $117 per barrel. Today, it gained another 4%. So, the rally from $95 to $117 pushed oil higher by more than 20% in just three days. This rapid rise is now fueled by fears that there will be a ban on oil supply from Russia which will lead to a shortage in the world market and, consequently, to extremely high prices. To protect themselves against rising prices, producers massively buy oil futures, and this drives the price up. Amid the Russia-Ukraine conflict, gas futures are trading in the range of $1,800-$2,200 on ICE.
In the meantime, coronavirus cases are declining in Russia and other countries. For example, in Russia, less than +100K new cases have been reported in the past two days. In St. Petersburg, QR codes have been canceled since March 4.
S&P500 is at 4,386, holding in the range of 4,350-4,420.
The February employment report showed growth of +475K jobs yesterday, well above forecasts. US oil stockpiles fell -2.7 million barrels in a week. In general, oil trading at $110 can have a serious impact on the US economy, especially if prices continue to rise. Fed Chairman Powell confirmed that the Fed is ready to fight inflation. So, markets are waiting for a rate hike on March 16. JPMorgan analysts expect the Fed to raise the rate at its every meeting until the end of the year. Judging by the dynamics of the US market, investors are not afraid of the rate increase.
Today, the US will release the data on unemployment and the ISM report on business activity in the services sector. The indicator is expected to advance to 62%.
USDX is trading at 97.40 and holding in the range of 97.00 - 97.80. USD has hit record highs this year due to the situation in Ukraine. Therefore, the uptrend is likely to continue.
USD/CAD is trading at 1.2625, staying in the range of 1.2550 - 1.2650. The price is about to break below the 1.2600 level pressured by a huge rally of oil prices to $114.
Conclusion: The US market is likely to continue rising supported by a strong economy, especially if Russia and Ukraine reach an agreement.
