The threat of an imminent attack by Russia in the Ukraine has stocks on the defensive Monday, and oil prices topping $95 a barrel.
U.S. equity futures slumped lower Monday, while Treasury bond prices jumped and oil re-asserted its recent seven-year highs, as investors heeded warnings from the White House that Russia could be preparing an invasion of Ukraine as early as this week.
President Joe Biden cautioned Russia President Vladimir Putin during a weekend phone call that the U.S. would take ‘decisive’ action against any military action in the Ukraine, while National Security Adviser Jake Sullivan said the U.S. would defend “every inch of NATO” in the even of a Russian invasion.
“We cannot perfectly predict the day, but we have now been saying for some time that we are in the window, and a major military action could begin by Russia in Ukraine any day now,” Sullivan told CNN Sunday. “That includes this coming week, before the end of the Olympics.”
The specter of military conflict on the European border, and the disruption of gas supplies to the Germany and elsewhere, lifted global oil prices past the $95 per barrel mark in overnight trading and triggered a retreat from risky assets into the safe-haven of the U.S. dollar and the Treasury bond market.
WTI crude futures for March delivery, which are tightly linked to U.S. gas prices, were marked 21 cents higher from their Friday close at $93.31 per barrel in overnight trading. Brent contracts for April, the global benchmark, were last seen 11 cents higher at $94.57 per barrel.
At the same time, investors are paring bets on a 50 basis point rate hike next month, and indeed on any Federal Reserve action prior to its scheduled meeting on March 15 to March 16, following the publication of a new $33.3 billion bond-buying schedule that lasts into early March, a move analysts see as incompatible with interest rate increases.
On Wall Street, futures tied to the Dow Jones Industrial Average are indicating a 215 point opening bell decline while those linked to the S&P 500 are priced for a 33 point retreat.
Nasdaq Composite futures are indicating a further 155 point slide for the tech-focused benchmark as 10-year Treasury note yields ease to 1.922% in early New York trading
With a slow week for corporate earnings and economic data releases on tap, investors are likely to be focused on the strength of the U.S. consumer, and the impact of the fastest inflation in more than 40 years on retail spending, with a holiday quarter update from Walmart WMT and January retail sales from the Commerce Department.
Retail sales are expected to grow 1.8% from last year when the data is published on Wednesday, according to Street forecasts, as spending rebounds from a difficult December period where sales fell 1.9%. Walmart’s fourth quarter earnings follow on Thursday, with analysts looking for an adjusted bottom line of $1.50 per share on revenues of $151.8 billion.
Tesla (TSLA) – Get Tesla Inc Report shares were active in pre-market trading after data from China showed a slowdown in monthly sales as supply-chain disruptions continue to trim capacity at its Shanghai gigafactory in the world’s biggest car market.
Johnson & Johnson (JNJ) – Get Johnson & Johnson Report shares are also likely to be in focus as the healthcare giant prepares for a week of court testimony linked to its decision to put potentially billions of talc liabilities into a special company that immediately filed for bankruptcy.
In overseas markets, Europe’s Stoxx 600 fell 2.68% by mid-day trading in Frankfurt while the region-wide MSCI ex-Japan benchmark slumped 1.6% into the final hours of trading.
Japan’s Nikkei 225 ended the session 2.23% lower at 27,079.59 points.
