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Russian Shelling, Russian Wheat, Russian Oil, U.S. Jobs: What’s Moving Markets


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By Geoffrey Smith — Russian shelling causes a fire at Europe’s largest nuclear power plant – but there are no reports of any radiation leakage. The euro and European stock markets slump on the prospect that existing loopholes in sanctions will be closed to strangle Russian commodity exports. Commodity prices, meanwhile, are on course for their biggest weekly gain since the 1960s, led overnight by advances in wheat and nickel. Oh, and the monthly U.S. payrolls report is due and is expected to keep the Federal Reserve on course for a 25 basis point hike in interest rates later this month. Here’s what you need to know in financial markets on Friday, 4th March.

1. Russian forces seize Europe’s largest nuclear power plant

Russian forces secured control of the largest nuclear power plant in Europe, outside Zaporizhzhya in eastern Ukraine.  A fire that broke out in a building away from the nuclear reactors was brought under control. There was no damage to the reactors.

Fears of a possible radiation leak – stoked by popular memory of the Chernobyl disaster in northern Ukraine during the late Soviet period – have proved unfounded. The reactors are built completely differently and have been retrofitted with a massive containment vessel that protects it against most plausible scenarios.

Russia’s Ministry of Defense blamed the fire on a squad of Ukrainian provocateurs. The head of the International Atomic Energy Agency, Raphael Grossi, said that the damage had been caused by Russian weaponry. Lithuania’s Prime Minister said Russian shelling of the plant amounted to ‘nuclear terrorism’.

Russia and China had on Thursday voted against an IAEA resolution aiming to guarantee the safety of Ukraine’s nuclear installations.

2. Euro hits 22-month lows as sanctions fears deepen

The euro dipped below $1.10 for the first time since May 2020, as the progress of Russia’s war in Ukraine raised the likelihood of tougher Western sanctions that will hit the Eurozone economy disproportionately hard.

European stock markets also extended their decline, with the Italian FTSE MIB on course for an 11% drop this week and the German DAX on course for a drop of 9.3%.

An aide to French President Emmanuel Macron had briefed reporters on Thursday that people should “fear the worst” after Russia’s Vladimir Putin repeated his determination in a phone call with Macron to pursue the war to its end.

The number of senior European politicians now willing to accept a complete ban on purchases of Russian energy exports – which were originally exempted from last week’s sanctions packages – is rising daily, as the scenes of devastation from Ukraine’s cities multiply.

3. Payrolls seen extending U.S. labor market recovery

The U.S. economy is expected to have added another 400,000 jobs in the month through mid-February, continuing its rapid replacement of the jobs that were lost during the pandemic. The Labor Department releases its monthly report at 8:30 AM ET. 

That would represent a modest slowdown from 478,000 in January, but still an impressive performance given the disruption to retail, travel and hospitality from the wave of Omicron-variant Covid-19.

It would also cement expectations for a 25 basis point hike in the fed funds rate when the Federal Reserve’s policy-making committee meets in two weeks’ time.

The unemployment rate is expected to have fallen to 3.9% from 4.2%, but analysts will also zero in on developments with the labor force participation rate, which is still more than a full percentage point below its pre-pandemic level of 63.4%.

4. Stocks set to open lower

U.S. stocks are set to open lower later, amid the negative news flow out of Ukraine and Russia. The Russian Duma earlier approved a law that would punish the spread of ‘misleading’ news about the war in Ukraine with up to 15 years in prison.

By 6:20 AM ET (1120 GMT), Dow Jones futures were down 334 points, or 1.0%, on course for a third weekly loss in four. The S&P 500 futures contract was also down 1.0% while the Nasdaq 100 futures contract was down 0.9%.

Stocks likely to be in focus later include software company Splunk (NASDAQ:SPLK), which received a vote of confidence from Helman & Friedland in the form of a 7.5% stake purchase.  Gap (NYSE:GPS) stock and Broadcom (NASDAQ:AVGO) stock are also headed higher in premarket after well-received quarterly updates late on Thursday, while Costco (NASDAQ:COST) stock is marked down after warning of container delays, higher labor and freight costs and chip shortages, all of which outweighed the better-than-expected results in its fiscal second quarter.

5. Commodities set for best week since 1960s

Commodities remained on course for their biggest weekly gain since the 1960s, as the prospect of tighter sanctions on Russian exports continued to force buyers to look for substitutes.

By 6:25 AM ET, U.S. crude futures were up 2.2% at $110.06 a barrel, while Brent was up 2.0% at $112.66 a barrel. While that’s some way below the peaks seen earlier this week, it’s still a weekly gain of over 20%, the kind of increase that has in the past always resulted in demand destruction and an economic slowdown.

Wheat prices also continued to surge, a day after an Estonian cargo ship sank in the Black Sea after hitting a mine. That all but ended the chance of any ship securing insurance for trips into and out of Russian and Ukrainian Black Sea ports. The two countries account for nearly 30% of global wheat exports.

Elsewhere, Nickel Futures hit $29,823 a ton in London, their highest since 2008, on the same fears about the availability of Russian supply.

Russian Shelling, Russian Wheat, Russian Oil, U.S. Jobs: What’s Moving Markets

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