Stocks fall as fighting continues and sanctions intensify; Border Open Talks

Shares around the world fell as fighting in Ukraine continued, as talks aimed at ending the war opened and sanctions began to hit Russia’s financial system. Additional sanctions have been imposed on Russia by Western leaders, including the removal of some key Russian banks from the SWIFT system. The prices of commodities sensitive to the geopolitics of Eastern Europe (oil, gas and cereals) rose.

Key points to remember

  • Stocks around the world fell as fighting in Ukraine continued and talks aimed at ending the war opened on the Belarusian border.
  • Sanctions began to hit Russia’s financial system, and the country’s central bank more than doubled its key interest rate as the ruble plunged.
  • Over the weekend, the US, EU, UK and Canada announced that some Russian banks would be removed from the SWIFT system.
  • The prices of commodities sensitive to the geopolitics of Eastern Europe (oil, gas and cereals) rose.

Russia’s central bank more than doubled its key rate to 20% in response to the ruble’s fall. The Russian currency fell almost 30% against the US dollar in reaction to the sanctions.

Last week, US stocks rebounded after a strong sell-off. On Friday, the Dow Jones rose more than 2.5%, the S&P 500 gained 2.2% and the Nasdaq added 1.6%. For the week, the S&P 500 rose 0.8%, the Dow Jones fell 0.1% and the Nasdaq rose 1.1%.

Government bond yields fell sharply, while prices, which move inversely to yield, rose. The yield on the 10-year Treasury fell to 1.92% as investors sought safe havens. Oil prices rose more than 5%, with light sweet crude trading above $96 a barrel. Brent futures were above $102 a barrel. Bitcoin price rose more than 1% above $38,000.

Later this week, Federal Reserve Chairman Jerome Powell will testify before Congress on the economy and monetary policy. On Friday, the government will publish its latest employment report. US payrolls are expected to rise by 450,000 after rising by 467,000 in January. The jobless rate should have risen to 3.9% in February, after gaining 4% in January.

Later this morning, the Institute for Supply Management releases the Chicago Purchasing Managers Index for February. Economists expect a reading of 63, two points lower than January’s reading.

Companies reporting earnings today include HP Inc., Lucid Group Inc. (LCID), Workday Inc. (WDAY) and Zoom Video Communications Inc. (ZM). Others later this week include Target Corp. (TGT), Nordstrom Inc. (JWN), Dollar Tree Corp. (DLTR) and Best Buy Inc. (BBY).

Today’s Headlines: Quick Shots

SpaceX’s Starlink satellite internet service has been activated in Ukraine, according to CEO Elon Musk. The move follows power outages in Ukraine after the Russian invasion.

Norway’s sovereign wealth fund will vote against Apple Inc.’s (AAPL) executive compensation plan that will pay CEO Tim Cook $82 million in stock. The $1.3 trillion fund is the largest in the world and owns more than 1% of Apple shares.

Chinese electric car maker NIO plans to list in Hong Kong on March 10. The move comes as regulatory risks increase in the United States and China for Chinese companies listed in New York.

The U.S. Securities and Exchange Commission (SEC) has unveiled a pair of proposals expanding the data short sellers must disclose about their bets on falling stocks. The new rules would provide the public with visibility into data regarding large short positions for individual stocks.

China’s Huawei has launched a competitor to Inc.’s (AMZN) Kindle e-reader. The company’s paper MatePad and other new products could give a boost to its consumer division which has been hit by US sanctions.

Lordstown Motors Corp. (RIDE) will release its fourth quarter results. The company is expected to advise on production of its electric truck, which was delayed earlier due to supply chain issues.

The big story: BP leaves its stake in a Russian oil company

BP Plc (BP) is ending its partnership with Russian energy company Rosneft Oil Co., citing Russia’s recent moves against Ukraine. BP’s traded shares have fallen more than 7%, although shares are up about 12% so far this year, and about 25% over the past year.

BP versus S&P 500 12 months.

BP has held a 20% stake in Rosneft since 2013 and has operated in Russia for more than 30 years. The company had been under pressure from British officials who had expressed concerns about BP’s involvement. BP now faces a potential loss of up to $25 billion to sell the stake, which is valued at around $14 billion.

BP currently depends on Rosneft for about a third of its oil and gas production. BP will also no longer rely on dividends from Rosneft. Those dividends brought BP about $640 million last year, and dividends in 2022 could be worth more than $1 billion. The oil giant could also suffer foreign exchange losses of $11 billion on BP’s books.

BP is one of the major oil and gas companies with the most exposure to Russia. The company said yesterday it was still on track to spend about $4 billion a year through 2025 on stock buybacks.

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