Marketmind: A new kind of curtain

March 9, 2022

A look at the markets of Dhara Ranasinghe for the day ahead.

When McDonald’s opened in central Moscow’s Pushkin Square in 1990, it became a symbol of burgeoning American capitalism as the Soviet Union crumbled.

Now, news that McDonald’s has halted sales in Russia, along with PepsiCo, Coca-Cola and Starbucks, is another sign of a new dividing line being drawn between East and West in the wake of Russia’s invasion of Ukraine.

Russia, meanwhile, warned on Wednesday it was preparing a broad response to sanctions that would come quickly and would be felt in the West’s most sensitive areas.

For some, the move by companies like McDonald’s is overdue – after all, a number of major corporations had already severed ties with Russia when the West tightened sanctions. Others argue that such a move can hurt public opinion among Russians suffering from the economic pains unleashed by the conflict.

After days of selling, there are signs of a certain breathing space for the world stock exchanges. European and US stock futures are trading in positive territory and the MSCI World Stock Index is stable near 1-year lows.

Maybe the bad news has been priced in for now?

Oil prices remain to be watched after rising again following a new US ban on Russian oil. Britain also announced that it would stop importing Russian oil and oil products by the end of 2022.

Brent crude is above $131 a barrel and has increased gains by nearly 35% since Russia’s February 24 invasion of Ukraine.

This increase is already being felt by consumers at the pump through skyrocketing fuel prices.

Aluminum prices, a key Russian export, rose 5% on Wednesday, a day after the London Metal Exchange suspended trading in nickel after prices doubled, blamed on covering short sales by a top producer .

As one analyst noted last week (before the risk of Western bans on Russian energy increased), “this is going to hurt.”

Oil and inflation expectations

Key developments that should give markets more direction on Wednesday:

– China factory inflation eases in February, focus on global commodities

– Fitch further downgrades Russia’s rating to junk, says debt default imminent

– South Korea holds presidential elections.

– German budget

– Opportunities at US JOLTS

– Auction of 10-year US notes

(Reporting by Dhara Ranasinghe; Editing by Sujata Rao) Marketmind: A new kind of curtain

Caroline Bleakley

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