S&P500
On Tuesday, the equity market declined again due to the ongoing war in Ukraine.
The Dow Jones lost 1.8%, the NASDAQ Composite dropped by 1.6%, and the S&P500 decreased by 1.6%.
The negotiations between Russia and Ukraine to at least ceasefire have not brought results. The second round is scheduled for March 2. However, the talks may not take place as Kyiv demands to stop ceasefire and shelling. This move could disrupt the negotiations. Russian troops are moving slower than expected to the capital. However, on Tuesday evening, A Russian military convoy has amassed on the outskirts of Ukraine's capital. Ukrainians are defending themselves.
Western countries imposed very tough sanctions against the Kremlin for the military attacks on Ukraine. A significant part of the Central Bank and the Ministry of Finance's assets as well as their operations abroad have been frozen. Several of Russia's largest banks, including VTB, are disconnected from SWIFT. The EU closed its airspace to Russian airlines and private jets. On Wednesday morning, the US closed the airspace for Russia as well. Airplane manufacturer Boeing suspended parts, maintenance, and technical support for Russian airlines. There are about 300 Boeing aircraft in Russia that cannot fly abroad without maintenance. Foreign companies are massively shutting down their business in Russia. Multinational foreign corporations began closing their operations in Russia.
The Kremlin strongly disagrees with the fact that its military operation is called a war. It also prohibits local media to use this word.
The war in Ukraine continues. Western states are sending military aid to Kyiv and preparing new sanctions against the Kremlin. However, negotiations are still possible.
Asian stock markets opened with losses. Japan's stock indices dropped by 1.9%, China's stock market slid down by 1%.
The Russian ruble slipped to 110 versus the US dollar and 125 against the euro on MICEX. The ruble rose by about 10 rubles. On Monday and Tuesday, the Russian stock market remained closed by the decision of the Central Bank, fearing a crash. The Central Bank of Russia has imposed a ban on short selling. It provided additional liquidity to banks by offering 1 trillion rubles to prevent the collapse of the Moscow stock exchange and prop up the currency. It also sharply raised its interest rate to 20%. Sberbank and VTB also said about a sharp increase in the key rate.
As for the commodity market, oil prices grew drastically by 5%, on Wednesday. Brent Crude reached $110 per barrel, a high of 2014 amid the risk of limiting supplies from Russia. Gas prices also soared to $1,500 on the ICE exchange because of the war in Ukraine, up to $ 1,500. It also showed a 30% daily increase.
Yesterday, the European Parliament called on the EU to ban Russia from exporting oil and gas to the EU. Nevertheless, it is just a resolution. In the case of such a ban, oil prices in the EU may climb to $200-250. Such a scenario looks likely if there is an aggravation of the conflict.
OECD members can sell about 70 million barrels from oil reserves to prevent a new surge in oil prices.
The S&P 500 is trading at 4,306. It is likely to remain in the range of 4,260 – 4,360.
Yesterday, the US unveiled the ISM Manufacturing PMI index survey. In February, it climbed to 58.6% from 57.6% in January. The US economy remains strong.
Construction spending increased by 1.3% on a monthly basis, exceeding forecasts. Today, investors are awaiting ADP data for February. The economy is expected to total 350,000 new jobs. The US stock market shows signs of recovery. However, it is vulnerable to news on the Russia-Ukraine conflict. This news is the main driver for the market.
The US dollar index is trading at 97.40. It is projected to stay in the range of 97.10 - 97.70.
The US currency maintains its rally amid geopolitical tensions. Yesterday, it reached a new high.
The USD/CAD pair is trading at 1.2720. It is likely to fluctuate in the range of 1.2600 - 1.2800.
The pair slightly decreased due to the strengthening of the US dollar. Even rising oil prices failed to facilitate an increase in the pair.
Conclusion: now, all market participants hope that the parties will be able to make a truce. If so, the stock market will finally gain momentum.