- China’s Stimulus Fails to Jolt Construction
- Why the Chinese Internet Is Cheering
- Liquidity Vanishes
- Western Firms Head For The Exit
- Shares in Russian Energy Giants, Putin’s Safety Net, Tumble
- New Shortages
- Oil Prices Climb As Ukraine Crisis Deepens
- Only Thing That Can Restrain Oil
- The ‘PhD.’ Monetary Standard
- Wall Street’s Risky ‘Razor Blade’ Trade
- Corporations Raise Prices
- Tech Giants Turn to a Classic Recruitment Tool
- Berkshire Hathaway’s Reduced Buybacks
- Barclays Pays Out Millions for Failing to Vet Collapsed FX Firm
Financial fallout from the crisis in Ukraine is escalating rapidly, along with an intensification of violence and battles throughout the country. Vladimir Putin has put Russia's nuclear forces on alert, Belarus is preparing to send troops into Ukraine and a convoy of Russian vehicles are surrounding Kyiv, though tougher-than-expected resistance has been seen on the ground. Diplomatic progress is also seen as unlikely as officials from both sides meet today for the first talks since start of the invasion, while the EU upended years of policy by supplying weapons to a "country at war" for the first time in its history.
The latest: Western sanctions have sent the ruble into a nosedive, with the currency tumbling 30% overnight to an all-time low versus the dollar. In response, Russia's central bank more than doubled its key interest rate to 20%, freed local bank reserves to boost liquidity and ordered exporters to sell 80% of their hard currency revenues. In a bid to shield the nation's assets, brokers were also banned from handling sales of securities by non-residents, while Russian oligarchs were put on watch by many Western nations.
All the uncertainty has led to renewed risk-off sentiment, with U.S. stock index futures falling as much as 3% after major comeback sessions last week. Concerns over energy disruptions sent crude oil futures in the opposite direction, with the contracts climbing 4% to $95/bbl. Risk aversion was also seen elsewhere, as gold futures rose 1.2% to about $1,910 a troy ounce, the dollar index advanced 0.8% to 97.368 and the yield on the benchmark 10-year U.S. Treasury note fell 7 bps to 1.91%.
"A bank run has already started in Russia over the weekend... and inflation will immediately spike massively, and the Russian banking system is likely to be in trouble," declared Jeffrey Halley, senior market analyst at OANDA. "These sanctions from the West are likely to eventually hurt trade flows out of Russia [around 80% of FX transactions handled by Russian financial institutions are denominated in USD], which will also hurt the growth outlook of Russia's key trading partners including Europe and lead to greater inflationary pressures and risk of stagflation, we think," added analysts at Nomura.
Sanctions buildup: Over the weekend, Western governments said they would cut off a select number of Russian banks from the SWIFT international payment network, and sanctioned some transactions of the Central Bank of Russia. That will make it harder for Moscow to shore up the ruble, its economy and prevent the country from getting around existing sanctions. Russia has meanwhile sought to quell the panic, saying it has necessary resources and tools - like $630B of foreign reserves - to maintain financial stability, though the S&P cut its credit rating to "junk," dealing a blow to the country's capital markets. (31 comments)
Governments aren't the only ones wounding Russia's economy as a move to divest from the country takes hold among corporations. British oil major BP (BP), the biggest foreign investor in Russia, is selling its 20% stake in Rosneft (OTCPK:RNFTF) - at a cost of up to $25B - after coming under fire from the U.K. government. Up until now, BP has maintained that it was in Russia for business, not for politics, but its 30-year run in the country may now be unfolding.
The campaign spreads: Norway's Equinor (NYSE:EQNR) is following suit, exiting its joint ventures in Russia and stopping new investments there. "We are all deeply troubled by the invasion of Ukraine, which represents a terrible setback for the world, and we are thinking of all those who are suffering because of the military action," declared CEO Anders Opedal. In fact, Norway's government has even ordered its $1.3T oil fund, the world's largest sovereign wealth fund, to ditch its $3B in Russian investments.
Joining the campaign to isolate the country, UPS (NYSE:UPS) and FedEx (NYSE:FDX), two of the world's largest logistics companies, have suspended shipments to Russia. Dell Technologies (NYSE:DELL) has also banned sales to the country due to new export controls that covered computers. Meanwhile, Meta Platforms (NASDAQ:FB) and Twitter (NYSE:TWTR) are in overdrive mode to remove fake accounts, while Apple (NASDAQ:AAPL) is facing growing pressure to cut off Russians' access to the App Store.
To the skies: Just as air travel was picking up following the latest coronavirus wave, the European Union shut all Russian planes out of its airspace, as well as Canada. "That includes the private jets of oligarchs, and commercial airliners owned, registered or controlled by Russians," said European Commission President Ursula von der Leyen. Delta Air Lines (NYSE:DAL) has additionally suspended its code-sharing agreement with Russian flag carrier Aeroflot, further choking off Russia's access to global aviation. (14 comments)
Techies are gathering in Barcelona for the Mobile World Congress (MWC), which kicks off today and runs through March 3. The trade show brings together mobile operators, device manufacturers, technology providers and engineers to present their latest work and share their vision of the future. This year's theme is "connectivity unleashed" and is expected to feature some major announcements after the show was canceled in 2020 due to COVID and was a quiet event last year for the same reason.
Quote: "We're trying to emphasize that we're moving away from just simple connectivity to meaningful connectivity where we are connecting things and we are using data and everything that benefits from being connected will be connected," said Mats Granryd, Director-General of the GSM Association which organizes the MWC. "It's no longer just mobile operators to mobile operators or me connected to you. It is fintech. It's car manufacturers, it's utility companies, it's transport companies."
Expect to see some ground-breaking products and technologies, as well as creators and innovators in the industry. Chinese smartphone maker Realme is set to unveil the world's faster smartphone charger - that could enable a device to go from zero to full in just a few minutes - while Samsung (OTC:SSNLF) will show off its Galaxy S22 line of handsets and revamped Galaxy Book 2. Other themes that will be explored include artificial intelligence, IoT, cryptocurrencies and the metaverse.
On the exhibitor list: Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOGL), Huawei, Meta (NASDAQ:FB), Microsoft (NASDAQ:MSFT), Salesforce (NYSE:CRM) and Snap (NYSE:SNAP) - (the Russian Pavilion has been canceled at the "unifying event" due to the crisis in Ukraine).
Releasing its quarterly results over the weekend in typical fashion, Berkshire Hathaway (BRK.A, BRK.B) reported operating earnings of $7.29B in Q4, marking a 45% Y/Y jump as insurance underwriting reversed from a year-ago loss. Railroad and utilities earnings also contributed to the gain, specifically BNSF Railway and utility powerhouse BHE. Berkshire's businesses represent a wide swath of American industry, spanning insurance, transportation, housing and real estate, energy, consumer products and industrial manufacturing.
Snapshot: Similar to many companies that have already reported earnings, supply chain disruptions and other factors pushed up Berkshire's cost of doing business. "Many of our businesses were negatively affected by ongoing global supply chain disruptions, including those attributable to major winter storms and a hurricane in North America, which contributed to higher input costs," the firm wrote in its 10-K filing. 2021 total costs and expenses rose 5.5% to $243.9B vs. a 2.5% increase in 2020.
Investing legend Warren Buffett was quick to mention Apple (AAPL) in his annual letter to shareholders, listing the tech giant under the heading "Our Four Giants" and calling the company the second-most important after Berkshire's group of insurers. He also hailed CEO Tim Cook's stock repurchase strategy, and raised his stake in Apple to 5.55%, up from 5.39% a year earlier. "That increase sounds like small potatoes. But consider that each 0.1% of Apple's 2021 earnings amounted to $100M. We spent no Berkshire funds to gain our accretion. Apple’s repurchases did the job."
Go deeper: Berkshire's Apple investment is now worth more than $160B, accounting for 40% of its equity portfolio, while Buffett has even followed Cook's buyback strategy by repurchasing a record of $27B of Berkshire shares in 2021. The reason? Buffett bemoaned the lack of good investment opportunities, noting that both he and longtime right-hand man Charlie Munger found "little that excites us." Berkshire's cash pile stood near a record $146.7B at the end of last year, while its stock has risen 6% in 2022, way ahead of the 8% loss recorded by the S&P 500. (196 comments)
In Asia, Japan +0.2%. Hong Kong -0.2%. China +0.3%. India +0.7%.
In Europe, at midday, London -1%. Paris -2.9%. Frankfurt -2.2%.
Futures at 6:20, Dow -1%. S&P -1.2%. Nasdaq -1.2%. Crude +4.2% $95.42. Gold +1.2% to $1909.60. Bitcoin -2.6% to $38,281.
Ten-year Treasury Yield -7 bps to 1.91%
Today's Economic Calendar
8:30 International Trade in Goods (Advance)
8:30 Retail Inventories (Advance)
8:30 Wholesale Inventories (Advance)
9:45 Chicago PMI
10:30 Dallas Fed Manufacturing Survey
10:30 Fed's Bostic: “The Federal Reserve and the Economy”
3:00 PM Farm Prices
What else is happening...
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Elon Musk says Starlink internet satellite service available in Ukraine.
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