The S&P 500 futures trade 22 points, or 0.5%, above fair value to start the week as oil prices continue to cool off from last week’s highs. WTI crude futures are currently down 4.9%, or $5.31, to $103.95/bbl.
The lower oil prices have been driven by news that Russia and Ukraine are holding another round of ceasefire talks today, that China re-imposed Covid lockdowns and travel restrictions in certain cities, and that India might buy discounted oil from Russia.
Regarding Russia-Ukraine, Ukraine President Zelensky said he’s seen a positive shift in talks with Russia (echoing Mr. Putin’s perspective) on Saturday, only for Russia to continue its deadly offensive the following day and ask China for military equipment.
White House National Security Advisor Jake Sullivan said on the “Face the Nation” show, aired on CBS News , that Russia appears to be planning a chemical or biological weapon attack in Ukraine. Mr. Sullivan reiterated the president’s stance that Moscow will face a “severe price” if that happens.
The idea of a ceasefire agreement, though, has taken precedence in Europe while the lockdown news took a toll on Chinese stocks on Monday. The Europe Stoxx 600 is currently up 1.2%. China’s Shanghai Composite fell 2.6%. Hong Kong’s Hang Seng fell 5.0%.
Treasury yields are on the rise, as hopes for geopolitical progress overshadows any China-related growth concerns. The 2-yr yield is up seven basis points to 1.82%, and the 10-yr yield is up eight basis points to 2.08%. The U.S. Dollar Index is down 0.1% to 98.99.
In U.S. Corporate news:
- Pfizer (PFE 50.79, +0.52): +1.0% amid the Covid lockdowns in China and word from CEO Bourla that a fourth coronavirus vaccine will be necessary, according to CBS News.
- Turquoise Hill Resources (TRQ 26.21, +6.08): +30.4% after acknowledging a privatization proposal received from Rio Tinto (RIO 70.83, -1.89, -2.6%) for $2.7 billion.
Reviewing overnight developments:
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Equity indices in the Asia-Pacific region were mixed on Monday, although markets in China were particularly weak. Japan’s Nikkei: +0.6% Hong Kong’s Hang Seng: -5.0% China’s Shanghai Composite: -2.6% India’s Sensex: +1.7% South Korea’s Kospi: -0.6% Australia’s ASX All Ordinaries: +1.1%.
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In economic data:
- Singapore’s Q4 Unemployment Rate 2.3% (last 2.4%)
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In news:
- The Hang Seng plunged 5.0% with many stocks facing de-listing possibility in U.S. getting hit hard.
- Hong Kong, along with mainland China, also had to battle with COVID concerns. China has put Shenzhen in a lockdown mode, suspending all non-essential business until March 20. That is impacting Apple supplier, Foxconn, while COVID remediation issues in general are weighing on the casino operators and many tech stocks. Worries about a slowdown in China continue to fuel expectations that policy stimulus will be provided.
- U.S. and Chinese delegates meeting in Rome to discuss Russia-Ukraine situation amid reports Russia is asking China to provide military equipment.
- New Zealand announced that it will cut its fuel excise tax by NZ$0.25/liter for three months.
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Major European indices are trading with a positive bias to begin the week, jumping on reports that both Russia and Ukraine have pointed to signs of progress in their talks. STOXX Europe 600: +1.2% Germany’s DAX: +2.7% U.K.'s FTSE 100: +0.2% France’s CAC 40: +1.7% Italy’s FTSE MIB: +2.1% Spain’s IBEX 35: +1.3%.
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In economic data:
- Germany’s February Wholesale Price Index +1.7% m/m (0.9% expected; last 2.3%) and 16.6% yr/yr (last 16.2%)
- France’s January Trade Balance EUR8.0 bln (EUR -9.8 bln expected; last EUR -11.4 bln)
- Spain’s January Retail Sales 4.0% yr/yr (last -2.4%)
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In news:
- This news of progress comes amid separate reports noting that Russia has stepped up its military attacks on Ukrainian cities, has asked China for help in providing military equipment, is recruiting mercenaries form other countries, and has said convoys delivering military equipment to Ukraine are legitimate targets.
- Still, the idea that a ceasefire agreement could be reached, along with a notable drop in oil prices (Brent -4.1% to $108.04/bbl), has been a boon for sentiment that is lifting stock prices.
- These developments closer to home have overshadowed news that China is dealing with a COVID outbreak and has put Shenzhen in a lockdown mode until March 20.
- Lots of chatter that the UK may soon announce plans to help consumers deal with rising costs.
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U.S. equity futures:
- S&P 500 Futures: +11 @ 4,216
- DJIA Futures: +202 @ 33,146
- Nasdaq 100 Futures: -49 @ 13,253
Overseas:
- Europe: DAX +2.7%, FTSE +0.2%, CAC +1.7%
- Asia: Nikkei +0.6%, Hang Seng -6.0%, Shanghai Composite -2.6%
Commodities:
- Crude Oil -5.42 @ 103.91
- Nat Gas -0.102 @ 4.623
- Gold -18.45 @ 1966.55
- Silver -0.645 @ 25.515
- Copper -0.1145 @ 4.5110