By Geoffrey Smith
Investing.com — Oil prices surge as the EU eyes expanding its sanctions on Russia to include energy. Hopes for peace fade as the Kremlin rules out a meeting between Presidents Putin and Zelenskyy. A Boeing (NYSE:BA) 737 crashes in China – but it’s not a 737 MAX. Aluminum and steel prices surge. Nike (NYSE:NKE) reports earnings and the emerging world’s economic problems start to mount. Here’s what you need to know in financial markets on Monday, 21st March.
1. Oil surges as EU eyes expanding sanctions
Crude oil prices surged again after the European Union’s top diplomat, Josep Borrell said that the bloc is ready to discuss including energy in a new round of sanctions against Russia.
Energy purchases from Russia had been exempted from previous rounds of EU sanctions due to the lack of short-term alternatives, but the growing horror at Russia’s actions in Ukraine – Borrell accused Russia of “massive war crimes” – and the ease with which Russia avoided default last week appear to be pushing Europe to raise the pressure on the Kremlin, even if that increases the short-term damage to its economy. EU leaders are due to discuss other measures to avert an energy crisis at a two-day meeting that starts on Thursday.
Over the weekend, Germany’s vice-chancellor Robert Habeck signed a deal with Qatar to expedite shipments of liquefied natural gas (there were few further details available).
By 6:15 AM ET (1015 GMT), U.S. crude futures were up 4.3% at $107.56 a barrel, while Brent futures were up 4.1% at $112.31 a barrel.
2. Kremlin says not enough progress for peace talks; China still ambivalent
Sentiment toward risk assets globally soured after a Kremlin spokesman said that peace talks have not progressed enough for a meeting between the Russian and Ukrainian presidents to take place.
The comments come as Russia claimed to have deployed new ‘hypersonic’ missiles in combat for the first time. Reports suggest that Russia has all but secured complete control of the port city of Mariupol, after two weeks of heavy bombardment.
The UN High Commission for Refugees now estimates that over 13 million people in Ukraine are in need of humanitarian assistance, with over 3 million having fled to other countries.
Hopes that China may broker a peace, or at least not give Russia the support that it needs to sustain its offensive, live on after China said it will do “everything possible” to de-escalate the situation. Beijing still refuses to join international condemnation of the invasion, however.
3. U.S. stocks set to open lower; Boeing eyed after 737 crash
U.S. stock markets are set to open lower, as the weekend’s news flow failed to give enough reason to make further advances after the best week in several months for risk assets. The three main cash indices had gained by between 5.5% and 10.5% last week.
By 6:15 AM ET, Dow Jones futures were down 142 points, or 0.4%, while S&P 500 futures were down 0.2% and Nasdaq 100 futures were down 0.4%.
Stocks likely to be in focus later include Boeing, after a 737 airliner – not one of the 737 MAX range – operated by China Eastern Airlines (NYSE:CEA) crashed, killing 132 people. Boeing stock was down 6% in premarket.
After the closing bell, Nike will report earnings.
Fed Chairman Jerome Powell will address a conference of economists at 12 PM ET, while Atlanta Fed President Raphael Bostic speaks at 8 AM ET.
4. Metals volatility continues
Aluminum prices rose another 3.6% after Australia said it will ban the export of alumina to smelters in Russia. The move threatens to curtail the output of a metal that is widely used in packaging and other industries. Smelting capacity is concentrated in Russia due to the relatively low cost of electricity there.
Other metals’ prices, however, were in risk-off mode, with Nickel Futures again catching the eye as the London Metals Exchange was once more forced to suspend trading of its futures contract after it hit a 15% circuit breaker.
Platinum group metals also rose on fresh fears for Russian supplies to world markets and hot-rolled steel prices in Europe hit a record 1,400 euros ($1,550) a ton, but copper prices eased, reflecting concerns about global growth.
5. Emerging markets problems mount as Egyptian currency devalues, Sri Lanka seeks bailout
The strains of war and a global monetary tightening cycle are taking an increasing toll on emerging markets.
Egypt’s central bank allowed its currency to devalue by 13% against the dollar while raising interest rates by a full percentage point. The country of 105 million people faces a sharp deterioration in its terms of trade due to its dependence on foreign oil and wheat (it sources 80% of the latter from Russia and Ukraine).
Egypt was reported last week to be eyeing a fresh support package from the International Monetary Fund.
Also in trouble is Sri Lanka, which has asked the Chinese government for $2.5 billion in credit support, according to Chinese officials, in addition to seeking funds from India and the IMF.
(CORRECTION: The original version of this article stated the estimated number of refugees from Ukraine wrongly. The article has now been corrected)