We got the volatility on the Globex open on Sunday night/early Monday morning as futures markets turned sharply lower on the weekend sanctions moves…but the fade came pretty fast and cash equities held steadier and declines were less than feared. There is something about the internal dynamics of the market about this; futures are traded in thinner volumes usually, out of the main trading hours. People are trading the index – the FTSE 100 – as a single thing, not as a basket of individual stocks, each with their own outlook. Once the cash equity open happens the big boys come out to play and start to look at each company not just picking a level on the index. Futures out of the cash equity hours are a bit of a guessing game – even more than so than usual. 

Stocks in Europe were looking steady in early trading, flat to slightly negative for the DAX, CAC and Stoxx 50, though the FTSE 100 added 0.4% at the open before turning a bit lower. Likewise on Wall Street, after a plunge for the futures markets, stocks held up very well: the S&P 500 declined 0.25%, 130pts above the implied overnight low on the futures. The Nasdaq 100 ended up 0.4%. Spec tech did well – the ARK Innovation ETF (ARKK) up 4% and Tesla (TSLA) 7.5% higher for the session. JPMorgan says selling stocks now carries too much risk, noting that fundamentals for equities remain supportive. Citi dropped over 4% as it revealed a $10bn exposure to Russia, whilst defence stocks like Raytheon (RTX) and Lockheed Martin (LMT) jumped. Looking at defence stocks, this is about not just German policy shift to 2% of GDP, but broad European rearmament that will need to take place.  

Russia exposed stocks more mixed this morning: Polymetal (POLY), JPMorgan Russian Securities (JRS) and Petropavlosk (POG) all lower again, whilst Evraz (EVR) and Ferrexpo (FXPO) rallied a bit. The ruble has come off its lows and trades around 91 to the US dollar. At the moment it looks as though the Russian central bank is doing a not terrible job of supporting the currency, but through some pretty tough measures – massive rate hike and capital controls. How long can this last? First Switzerland and now even Monaco is kicking out Russian money!

As for Russia and Ukraine….the dreadful situation gets worse as heavy shelling of built-up areas shows us what is to come. Talks yesterday didn’t get far but the two sides have agreed to try again as a massive Russian convoy starts to encircle Kyiv. Bombing of civilians will harden Western public opinion against Russia – voters are already taking a pretty hard line across Europe. Unified public opinion complicates matters for governments who might prefer to base policy solely on the advice of their military intelligence and strategic advisors. But that is the way of things. For markets, this means the question of direct sanctions on oil and gas exports from Russia is a matter of when not if. Canada has already unilaterally banned Russian oil imports, though these are microscopic compared to Europe’s appetite for Russia’s crude and natural gas. Talk of a Nato-enforced no-fly zone needs to be ignored – who really wants the RAF to shoot down Russian jets and risk WW3? The problem of public opinion again… 

Oil remains bid, with Brent back above $100 this morning, nudging it back towards the early Monday morning high near $102. WTI trades a little under $98 in a broadly similar pattern. Bitcoin spiked yesterday afternoon – could be on the Swiss move to mirror EU sanctions, ending decades of neutrality, but more likely it reflects a belief that we are entering the end of dollar hegemony and the beginning of a bi-polar financial world. Bitcoin jumped to $44,200, up almost 29% from its Feb low.