US open: Wall Street heads lower, oil surges over $100

US futures

Dow futures -0.5% at 337350

S&P futures -0.35% at 4350

Nasdaq futures -0.5% at 14170

In Europe

FTSE -0.8% at 7399

Dax -2.3% at 14144

Euro Stoxx -2% at 3838

Ukraine worries hit the market

US stocks are heading for a weaker start as the Russia Ukraine conflict deepens. Peace talks have failed, and Russia’s defense minister has said that Russia will continue to attack Ukraine until it achieves its goals.

Oil prices have surged over $100, up 10% in just two days. With no sign of a ceasefire and oil prices elevated, inflation concerns are likely to grow.  

The list of companies pulling out of Russia continues to grow as government rachet up sanctions on Russia, the world’s 11^th largest economy. Following sanctions which have made operating in Russia very challenging, many firms are drawing the conclusion that it’s not worth with the financial or reputational risk to continue doing business there.

Looking ahead the US ISM manufacturing PMI is expected to rise to 58, up from 57.6. However, this is likely to be an afterthought alongside geopolitical tensions.

Sate of the Union address

Looking ahead Biden’s State of the Union address, which is not usually a market moving event, could be on this occasion. Biden gives the address as inflation is at a 40-year high and amid rising oil prices which suggest that surging prices may not be easing any time soon.  Biden is also likely to call for global unity on Ukraine, in a speech which is expected to be strongly devoted to foreign policy. Given how sensitive risk sentiment is right now, Biden’s comments could spark more volatility in the markets, particularly given rising concerns of a potential realignment in world order.

Where next for the Dow Jones?

After extending its run up from 32250 low reached las week, the Dow Jones hit resistance at 34100, and sellers re-entered pushing the price lower. The price has fallen below the 50 sma, which together with the receding bullish bias on the MACD is keeping sellers optimistic of further downside. The price is testing support from the two week falling trend line. A break below here could bring 33375 into focus, the weekly low ahead of 32850 the February 25 low and 32250.  Buyers need a move above 34100 to expose the 100 sma at 34450 and change the bias to bullish.

FX markets USD rallies, EUR tumbles further

USD is rising, building on gains from the previous session. Safe haven flows are lifting the greenback, even as expectations of a 50-basis point rate hike in March as falling. US data due later will likely be a secondary focus.

EUR/USD trades lower for a second straight session. The common currency has lost almost 1% in just two days as the Russian Ukraine conflict intensifies. Bets are growing that the ECB will hold back from hiking rates givens the Ukraine uncertainty. Yet with oil prices shooting higher and German inflation elevated at 5.1% the ECB might be forced to act.

GBP/USD  -0.13% at 1.3400

EUR/USD  -0.5% at 1.1162

Oil jumps 10% in 2 days

After booking gains of almost 5% yesterday, oil prices are on the rise again today with WTI pushing to $100 and Brent firmly over the $100 line in the sand.

The Russia, Ukraine conflict is stoking oil supply fears which are overshadowing talks  of a coordinated release of oil reserves.

Following sanctions from the West, buyers of Russian oil are having trouble with payments and vessel availability is also a problem.

With the conflict continuing there is no sign of a solution. In the meantime, the US along with its allis are arranging a coordinated release of oil reserves expected to be in the region to 60-70 million barrels.

OPEC + are due to meet tomorrow and are not expected to increase output above the previously agreed level.

WTI crude trades +5.6% at $101.15

Brent trades +6% at $103.70

Looking ahead

14:30 CAD Manufacturing PMI

15:00 US ISM Manufacturing PMI

18:30 BoE Saunders

21:30 API Crude oil inventories