Weekend Roundup: Stocks struggle, oil falls on US-Europe energy deal

March 28, 2022 By: WealthMintr Team

The weekend arrives with equity investors scrambling to lift key indicators from the US and Europe. After a negative opening, both European stocks and US index futures were trying to stay in positive territory.

Still, the direction is uncertain and dependent on a dubious scenario. To adjust their exposure to financial markets, investors carefully watch news about the Russian sanctions and the reaction of commodity markets. Indicators from Europe and the US have been increasingly detached, as the impact of the war in Ukraine is direct on the continent.

Moments ago, the Stoxx Europe 600 index, which for most of the morning was between highs and lows, was guided by gains in the technology and real estate sectors. Trelleborg AB’s shares soared after the Swedish industrial group agreed to sell its tire business. On the other hand, energy companies performed below expectations, following the fall in natural gas prices with the news that the US and the European Union reached an agreement to supply the raw material, reducing European dependence on the Russian supply.

The S&P 500 and Nasdaq 100 futures showed small positive variations. Treasury premiums, which had risen early in the morning, had given way a moment ago. Lately, short-term Treasury yields have seen the sharpest quarterly increase since 1984. Oil was retreating – WTI was already priced at around $100 a barrel.

MARKETS IN SHOCK

There are two fronts of concern for investors. The first is the unfolding of the war and the isolation of Russia, which not only affects the chessboard of geopolitical forces, but also has visible consequences for world inflation.

On the other hand comes the monetary policy of the world’s central banks. Inflation was already being treated as an undesirable intruder and, with the war, the problem worsened. In an attempt to control the inflationary spiral, monetary authorities are using measures such as raising interest rates and ending asset repurchase programs (which provided liquidity to markets in the most acute period of the pandemic).

ECONOMIC STALL?

However, a monetary tightening in this scenario of higher inflation and uncertainty could bring the economy to a sudden halt. Some experts in technical analysis identify in the yield curves of US Treasury bonds the expectation that there will be a strong economic slowdown – some even talk about recession.

BRENT RETREATS AS EUROPE DELAYS RUSSIA’S OIL BAN

Oil prices fell as the European Union postponed a ban on Russian oil imports, while Kazakhstan said disruption at a key export terminal should ease.

Brent futures fell 0.7% after floating earlier this Friday (25). The EU and the US have announced an agreement to reduce dependence on Russian fuel, although several nations remain uneasy about any potential oil embargo on a major supplier. Meanwhile, Kazakhstan expects a part of a terminal on Russia’s Black Sea coast to resume work on Friday, allowing tankers to be loaded again.

Crude oil is still up this week and has surged in the past four months, hitting the highest level since 2008 in early March, when Russia’s war in Ukraine shook already tight commodity markets. In response, the US and UK have moved to bar Russian oil, and many Western energy companies are also choosing to avoid Russian oil. Buyers in Asia, including China and India, appear to be absorbing some of these barrels..

THURSDAY’S NUMBERS

Dow (+1,02%), S&P 500 (+1,43%), Nasdaq (+1,93%), Stoxx 600 (-0,21%), Ibovespa (+1,36%)

On the one-month anniversary of the Russian invasion of Ukraine and with all the uncertainties in the air, US stock markets posted considerable gains at yesterday’s close. Even with the expected impact of the war on world economies and the monetary tightening announced to the four winds by the Fed, Wall Street stuck to the perception that the American economy will feel less of the economic bumps. Oil prices fell 3%, erasing gains from the previous day as the market reacted to the drop in US crude inventories over the past week.

WHAT TO WATCH FOR

FRIDAY

  • US: 5-Year/Mar Inflation Expectations and Consumer Confidence – Michigan/Mar; Pending Home Sales/Feb)
  • Europe: Summit of European Union leaders. Euro Zone (M3 Currency Mass, Private Sector Loans); Germany (Ifo Business/Sea Climate Index); United Kingdom (Retail Sales/Feb); Spain (GDP/4Q21); Italy (Business Confidence/Sea)
  • Latin America: Brazil (Consumer Confidence FGV/Mar; IPCA-15/Mar)
  • Central Banking: Speeches by Catherine Mann (BoE) and Fed Members John Williams, Thomas Barkin and Christopher Waller

MONDAY

  • US: Goods Trade Balance/Feb; Retail Inventories excluding Automobiles/Feb; Dallas/Mar Fed Business Activity Index
  • Asia: Japan (Unemployment Rate/Feb); Hong Kong (Trade Balance/Feb)
  • Latin America: Brazil (Focus Bulletin, Current Transactions/Feb; Foreign Direct Investment/Feb); Mexico (Trade Balance/Feb); Argentina (Retail Sales)
  • Central Banks: Statement by Andrew Bailey, Chairman of the BoE