Stocks reverse early gains as commodity prices surge

Bloomberg

Stocks reversed early gains on Thursday. Europe’s Stoxx 600 Index was slightly lower and most US futures slipped. Utilities led declines, while mining and energy stocks advanced as oil soared to the highest level since 2008.
Commodities markets from metals to oil and gas have been upended by the Ukraine crisis as big corporates withdraw from Russia, lenders pull back from financing deals and the threat of new sanctions deters buyers. European natural gas jumped to a fresh record, while zinc hit the highest since 2007 and other industrial metals extended a powerful rally.
Treasuries were little changed after sharp losses, though the US 10-year yield remains below the 2% levels seen before Russia’s action. The dollar and gold ticked up.
Russia’s ostracism continues: MSCI Inc and FTSE Russell are cutting Russian equities from widely-tracked indexes, while the London Stock Exchange suspends dozens of Russian depositary receipts from trading, isolating the stocks from a large segment of the investment-fund industry.
Russia’s credit rating was cut to junk by Moody’s Investors Service and Fitch Ratings amid doubts about its capability and willingness to service debt.
Meanwhile, monetary authorities appear intent on pushing ahead with tighter policy. Federal Reserve Chair Jerome Powell voiced support for a quarter-point Fed rate hike later this month and indicated the central bank may have to take tougher action if price pressures don’t start to ease. The bond market expects about five quarter-point moves this year.
The Fed chair managed to “appease risk-markets by ruling out a 50 basis-points hike in March, while simultaneously promising inflation vigilance at following meetings,” Citigroup Inc strategists William O’Donnell and Edward Acton wrote in a note.
“It’s really time for investors to be prepared for more volatility, especially in the bond markets,” as the Fed has yet to commence balance-sheet reduction, Nancy Davis, chief investment officer at Quadratic Capital Management LLC, said on Bloomberg Television.
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The Stoxx Europe 600 fell 0.1% in London. Futures on the S&P 500 fell 0.1%. Futures on the Nasdaq 100 fell 0.4%. Futures on the Dow Jones Industrial Average were little changed. The MSCI Asia Pacific Index fell 1.4%. The MSCI Emerging Markets Index fell 0.7%.
The Bloomberg Dollar Spot Index rose 0.1%. The euro fell 0.2% to $1.1093. The Japanese yen fell 0.1% to 115.69 per dollar. The offshore yuan was little changed at 6.3224 per dollar. The British pound fell 0.1% to $1.3388.
The yield on 10-year Treasuries declined one basis point to 1.86%. Germany’s 10-year yield was little changed at 0.03%. Britain’s 10-year yield advanced four basis points to 1.30%.
Brent crude rose 4.3% to $117.73 a barrel. Spot gold rose 0.2% to $1,932.01 an ounce.

Russia exposure wipes $100b from European stocks

Bloomberg

European stocks with business exposure to Russia have lost more than $100 billion in market value since the war risks surged. Still, with the impact of sanctions on Moscow remaining uncertain, few are ready to snap them up just yet.
“Nobody knows where this ends and we are in a maximum uncertainty environment that requires a rethinking for most investors,” said Peter Garnry, head of equity strategy at Saxo Bank AS.
From gold miner Polymetal International Plc to tire maker Nokian Renkaat Oyj and Austria’s Raiffeisen Bank International, the selloff of European companies with Russian exposure has been severe. Some stocks have lost three-quarters of their value since February 18, when concerns over a Russian invasion of Ukraine began to take hold. Popular names such as Renault SA and Wizz Air Holdings Plc have also fallen more than 20%.
In that time, a total of $100 billion has been wiped off the value of the 22 Stoxx Europe 600 companies that get more than 5% of their sales from Russia.
The impact on European equities from the Ukraine war doesn’t end there.