US open: Futures fall on Russian sanctions, growth concerns

US futures

Dow futures -1.17% at 33650

S&P futures -1.2% at 4327

Nasdaq futures -1.2% at 14018

In Europe

FTSE -1.2% at 7394

Dax -1.8% at 14287

Euro Stoxx -2.6% at 3867

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Fears for global growth grow

US futures are trading firmly lower, although they have picked up of the session lows as Russia, Ukraine ceasefire talks begin on the border with Belarus. The talks come after Russia was hit with crippling sanctions from the West which saw Moscow cut off from major financial markets in a move which sent the rouble tanking 30% to a record low and saw the Russian central bank hike interest rates to 20%.

The fallout from the tougher sanction ripped out across financial markets. Russia is he world’s 11^th largest economy so large scale financial and economic turmoil in the country will be felt elsewhere across the globe, although Europe will be harder hit than the US.

The largest concerns will be fears of disruption to oil and energy supply, in addition to grain, another key export of Russia’s.

Rises in prices of key commodities are likely to see already elevated inflation push higher still raising fears of stagflation.

Safe havens are the order of the day. Gold trades over 1% higher above $1910 as investors look for somewhere to park their money. Add into the mix the high inflation outlook, yet investors reining in hike expectations by central banks, and Gold has potential to climb towards $1915.

There is no high impacting US data due today, Russia, Ukraine headlines and sentiment will continue to drive trade.

Where next for the S&P500?

The S&P formed a double top 2^nd, 10^th February before the price fell firmly lower. The price has since rebounded from last weeks’ low of 4105, however the recovery stalled sat 4390 Friday’s high. The 50 sma crossed below the 100 sma in a bearish signal and the RSI suggests that there is more weakness to come.  The price is currently finding support at 4320 the falling trendline support a break below here could open the door to 4280 the late January low ahead of 4220, the January low. On the flip side buyers could look for a move over 4390 Friday’s high.

FX markets USD rallies, EUR tumbles

USD is advancing, building on gains from the previous week, as investor seek out its safe haven properties. There is no high impacting US data, so sentiment is likely to keep driving the greenback.

EUR/USD trades lower as the euro comes under pressure given its vulnerable position. Not only is there a war breaking out on its doorstep, but Europe is also overly reliant on Russian energy supplies. News that Ukraine and Russian have started talks have seen the EUR rise off session lows. Separately, ECB’s Fabio Panetta warned that the central bank should take moderate steps to control policy amid fears of derailing a fragile recovery.

GBP/USD +0.09% at 1.3400

EUR/USD -0.6% at 1.1197

 

Oil jumps as sanctions spark supply worries

After a roughly flat finish last week, oil prices have jumped higher at the start of the week. News of Western sanctions on Russia and the exclusion of Russian banks from the SWIFT international payment network has fueled fears of supply disruption. The details of how the moves to restrict SWIFT will be made is still unclear. If the restrictions are broad it could directly affect oil exports. Given that Russia accounts for around 10% of global oil supply, this would be significant. However, if the restrictions are narrow then there shouldn’t’ be a direct impact.

The oil market is already tight so any decrease in supply will be strongly reflected in the oil price. OPEC have downwardly revised their surplus forecasts by 200,000 bpd, highlighting market tightness.

WTI crude trades +4.9% at $95.10

Brent trades +4.2% at $98.30

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Looking ahead

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