Equities drop, oil rise induces concern for global economic growth

Russia will spend part of the National Wealth Fund on buying up shares of Russian companies that have collapsed. The Ministry of finance ordered to allocate up to 1 trillion roubles for these purposes. Although MICEX was closed for a second straight day yesterday, Russian stock market was battered by steep declines again, as shares and funds trading on UK and US exchanges plummeted in value. The CBR will keep MICEX closed today. RUBUSD fell to an all-time low of nearly 115 level but has pared back losses since then to about 103-105 levels. Meanwhile, the largest international corporations have curtailed or suspended their activities in Russia. Shell would exit its joint ventures with Gazprom, as well as the BP, which said earlier that it would sell nearly 20 percent of its stake in Rosneft. Apple has also moved to limit access to its digital services inside Russia, such as Apple Pay, and restricted the availability of Russian state media applications outside the country. The second round of negotiations between Russia and Ukraine officials is expected to begin today.

The conflict in Ukraine and sanctions imposed by the west sent prices of stocks southwards. S&P 500 futures fell 0.1%, S&P 500 fell 1.6% to 4,306.26 while Nasdaq 100 futures fell 0.1%, Nasdaq 100 fell 1.6% to 13,532.46. Interest for havens assets led to a global Bonds rally, with the 10-year UST yield falling to 1.71%. Gold rose to $1,938.00 per ounce. The prices of commodities continue to rise as Russia/Ukraine crisis deepens, casting a shadow on global economic growth expectation. WTI crude rose 5.7% to $109.67 per barrel. Russia’s attack of Ukraine endangers flows of grains, energy, and metals. The two countries account for more than 25% of the global trade in grains, and Russia is also rich in oil and gas. US President Joe Biden, in his first State of the Union address, said Russian counterpart Vladimir Putin was a “dictator” and warned the war will leave his country weaker. Biden also promised to fight inflation at home. Meanwhile, Fed Chair Jerome Powell is due to speak to lawmakers today. He’s expected to signal that the U.S. central bank will go ahead with plans to hike rates this month. Markets projection of up to seven rate hikes, may end up being three to four for the year.

After some hope of a recovery yesterday before eventually going south by close of trading yesterday, the space has opened weak this morning by about c.30c-60c despite oil up 3.87% from its closing levels the previous day. Despite the mixed sentiments seen in the space this week, the oil names have seen good two-way flows closing c.50c-1pt down yesterday. Angola seemed to be the only gainer yesterday as it continued to be well bid by RM clients outperforming its other oil counterparts and closing the day 1pt up.