Ceasefire Talks Fail, Crude Past $100, Biden's Speech - What's Moving Markets

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Ceasefire Talks Fail, Crude Past $100, Biden's Speech - What's Moving Markets
Credit: © Reuters.

By Peter Nurse 

Investing.com -- Ceasefire talks between Russian and Ukrainian officials have failed to end the conflict, and U.S. stocks are expected to open lower as a result, while crude oil surges past $100 a barrel once more. The number of companies taking a stand against Russian aggression is rising, and focus will turn Tuesday to U.S. President Biden's State of the Union speech. Here's what you need to know in financial markets on Tuesday, 1st March. 

1. Ceasefire talks fail; Companies pull out of Russia

Faint hopes that talks last night between Russian and Ukrainian officials near the Belarusian border could result in a ceasefire have been dashed as they ended without a breakthrough, and negotiators have not said when a new round would take place.

Meanwhile, Russian troops have escalated shelling of key cities in Ukraine, while they move slowly in a large convoy toward the capital, Kyiv, seemingly tightening their grip on the country.

The corporate world is starting to show its displeasure at the invasion, cutting ties with Russia and reversing around 30 years of investment by foreign businesses there, following the collapse of the Soviet Union in 1991.

BP (NYSE: BP ), Russia’s largest foreign investor, started the ball rolling by announcing on Sunday that it would exit its 20% stake in state-controlled Rosneft (OTC: OJSCY ), at a cost of around $25 billion.

U.K. peer Shell (LON: RDSa ) followed suit on Monday, ending partnerships with state-controlled Gazprom (OTC: OGZRY ). TotalEnergies (NYSE: TTE ) said it will no longer provide capital for new projects in Russia, while Daimler Truck (DE: DTGGe ), the world’s largest truck maker, said it will stop its business activities in Russia until further notice.

Other companies with major links to Russia, including the likes of Renault (PA: RENA ), Ford (NYSE: F ), Carlsberg (OTC: CABGY ), and Danone (PA: DANO ), will be under increasing pressure to make a stand, especially as their stock prices head south rapidly. 

2. U.S. ISM manufacturing PMI due

The main U.S. economic data due for release Tuesday is the ISM manufacturing purchasing managers index for February, which is expected to show, at 10 AM ET (1500 GMT), the sector continuing in strong expansionary territory, up 58.0 from 57.6 in January.

The Federal Reserve holds its next policy-setting meeting later in March and is expected to start raising interest rates to combat soaring inflation, particularly as the economy continues to show strong growth.

Earlier in the day Chinese factory activity recorded an unexpected expansion in February, with the manufacturing PMI coming in at 50.2, above the 50-point mark indicating growth, as well as the expected 49.9 and January’s 50.1.

In Europe, the key German manufacturing sector contracted slightly in February, with the PMI falling to 58.4 from 59.8 in January, but remained strongly in expansion territory.

3. Stocks set to open lower; Target results due

U.S. stock markets are set to open lower as investors react to the failure of Russia/Ukraine ceasefire talks with Russia’s invasion of its southern neighbor intensifying. 

By 5:10 AM ET (1010 GMT), Dow Jones futures were down 205 points, or 0.6%, while S&P 500 futures were down 0.7% and Nasdaq 100 futures were down 0.7%.

In a volatile session on Monday, the blue-chip Dow Jones Industrial Average lost nearly 170 points, or 0.5%, the broad-based S&P 500 dropped 0.3%, while the tech-heavy Nasdaq Composite rose 0.4%.

Investors are preparing to hear from Federal Reserve Chair Jerome Powell in his semiannual hearing on Capitol Hill, which begins on Wednesday, and ahead of there is the start of a big week for retail earnings from department stores and discount stores.

Target (NYSE: TGT ) gets the ball rolling before the bell, while cloud giant Salesforce (NYSE: CRM ) reports after the close. 

Additionally, Zoom Video Communications (NASDAQ: ZM ) stock traded substantially lower in premarket Tuesday after the video conferencing company posted a disappointing outlook.

4. State of Union speech

U.S. President Joe Biden is set to make his State of the Union address later Tuesday, needing to reconnect with the public as his approval ratings have dropped sharply as families struggle with rising inflation, driven in part by higher energy prices.

"The president will call on Congress to send him a bill that lowers costs and lowers the deficit without delay," the White House said in a preview of the speech. "American families need relief from higher costs, and they need it now."

His ‘Build Back Better’ social-spending agenda has stalled in Congress, and this is likely to result in Biden pivoting to addressing inflation and budget deficit worries via a four-point plan: moving goods cheaper and faster; reducing everyday costs; promoting competition; and eliminating barriers to jobs.

The annual consumer price index came in at 7.5% in January, the biggest year-on-year increase since February 1982, while Biden's approval rating was last at 43%, according to polls from Reuters/Ipsos, near to the lowest level of his presidency. 

5. Brent pushes past $100/barrel

Crude oil prices pushed higher, with the global benchmark Brent trading over the $100 a barrel level, on concerns that the sanctions levied on Russia, the second largest crude producer in the world, will lead to a substantial disruption in supplies.

Major oil and gas companies, including BP and Shell (BS: SHELl ), have already announced plans to exit Russian operations and joint ventures, and they are likely to be joined by other Western companies, deeming Russia’s actions in invading Ukraine unacceptable.

These concerns have outweighed talk that the United States and allies have been discussing a coordinated release of crude stocks to mitigate this supply disruption.

The industry-funded American Petroleum Institute releases its estimate of weekly U.S. crude inventories later in the session. 

Attention will also be on an extraordinary ministerial meeting of the International Energy Agency later Tuesday, and then Wednesday’s gathering of the Organization of the Petroleum Exporting Countries and other producers, including Russia, to discuss future production levels.

By 5:10 AM ET, U.S. crude futures were up 3% at $98.60 a barrel, after settling more than 4% higher on Monday, while Brent crude futures were up 3.6% at $101.41 a barrel, not far off the seven-year high of $105.79 reached last week.

Gasoline RBOB Futures were up 2.8% at $3.0130 a gallon.

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