U.S. stock index futures were down between 0.2 and 0.6% as investors fear the consequences of economic sanctions amid escalating Russia-Ukraine tensions. Concerns over supply problems lifted oil prices and energy stocks. A nuclear deal between the U.S. and Iran could ease some of the pressure on the oil market, but oil prices are getting dangerously close to $100.

Russian President Vladimir Putin recognized last night the independence of the Donetsk People's Republic and the Lugansk People's Republic. He also ordered "peacekeeping operations" in these areas - which probably means that the Russian army will be visible in these regions quite soon.

In response, Germany pulled the plug on the Nord Stream 2 gas and Britain imposed sanctions on five Russian banks and three men close to Putin.

The European commission and the United States should announce more sanctions later in the day.

The master of the Kremlin explained the move yesterday in a televised speech, with many historical references and a sharp criticism of the concessions made by the communist leaders since 1917. "I want to emphasize again that Ukraine is not just a neighboring country for us. It is an inalienable part of our own history, culture and spiritual space," Vladimir Putin said. The speech sheds some light on the state of mind of the leader.

The members of the UN Security Council, meeting in emergency, have largely condemned the Russian initiative. China did so less explicitly than the others, but stressed that countries "must resolve international disputes by peaceful means in accordance with the purposes and principles of the United Nations Charter.

As with every event of this type, everyone improvises themselves as experts to explain what is going to happen. We have been reading a lot in the last few days that a conflict between two countries often has little impact on stock market performance beyond the turmoil it generates when it breaks out. However, we should be wary of this statistic given the protagonists and the current economic and political context, even if it is always a latent conflict rather than a frontal one. Besides, Vladimir Putin may have planned from the beginning to frighten the West by a total invasion of Ukraine, with the only objective of making a simple annexation of the east of the country "more acceptable". There you go, I am now also becoming a specialist in geopolitics...

 

Today's economic highlights:

The FHFA house price index for December, the flash PMI indexes, the Richmond Fed manufacturing index and the Conference Board consumer confidence for February are today's main indicators.

The dollar fell to EUR 0.8818. Gold is trading at USD 1903 per ounce, while oil reaccelerated to USD 97.64 for Brent and USD 93.24 for WTI. US debt yields are down 7 points to 1.86%. Bitcoin is trading around USD 37,571.

 

On markets:

The Home Depot: The home improvement giant's stock rose 1.4% after reporting better-than-expected fourth-quarter like-for-like sales, buoyed by improved demand for its tools, paint and building materials.

* Macy's - The U.S. department store chain jumped 7% in pre-market trading after reporting better-than-expected fourth-quarter sales and earnings.

* Tegna - U.S. television operator TEGNA rose 6.4% in premarket trading after a source close to the deal announced that Standard General and private equity firm Apollo Global Management were in talks to buy the company for $5.4 billion.

* Meritor - The automotive supplier's shares soared 44.2% in pre-market trading in reaction to the announcement of its acquisition by engine manufacturer CUMMINS for $2.6 billion.

* Lockheed Martin, Raytheon Technologies - China decided Monday to sanction the two U.S. groups for selling weapons to Taiwan under a $100 million contract signed Feb. 7, which Beijing said "harmed China's security interests, seriously undermined Sino-U.S. relations and peace and stability in the Taiwan Strait."

* McDonald's - The fast-food chain announced Sunday that activist investor Carl Icahn is putting forward two director candidates to challenge the group's pork sourcing policy. The billionaire wants McDonald's to stop sourcing meat from farmers who keep pigs in cages.

* Alibaba - Chinese regulators have asked the country's state-owned enterprises to conduct new reviews of their investments in Ant Group, the Alibaba subsidiary whose initial public offering was suspended in late 2020.

* Apollo - Worldline announced on Monday that it has entered into exclusive negotiations with US investment firm Apollo, which has submitted a firm offer of €2.3 billion for its payment terminal business (TSS), inherited from the French group's 2020 acquisition of Ingenico.

 

Analyst recommendations:

  • Advanced Micro Devices: Bernstein raised its recommendation to outperform. PT jumps 32% to $150.
  • American Water Works: DA Davidson adjusts price target to $164 from $178, neutral rating kept.
  • Diamondback Energy: Roth Capital raises price target to $150 from $135, maintains buy rating
  • Goodyear: Jefferies cut its recommendation to hold from buy. PT up 6.2% to $17.
  • Intel: Atlantic Equities lowers price target to $40 from $45, maintains underweight rating
  • Life Storage: J.P. Morgan reinstated coverage with a recommendation of neutral. PT set to $142.
  • Marathon Oil: MKM Partners raises price target to $24 from $21, maintains buy rating
  • NatWest Group: Exane BNP Paribas raised its recommendation to outperform from neutral. PT up 28% to 305 pence.
  • Pennon: Jefferies downgrades from hold to underperform, targeting GBp 900.
  • PPL: RBC Capital Markets upgrades to outperform from sector perform. PT up 19% to $31.
  • Roku: Oppenheimer adjusts price target to $185 from $400, maintains outperform rating
  • Seeing Machines: Berenberg starts tracking as a Buy, targeting GBp 12.
  • Sempra Energy: Morgan Stanley adjusts price target to $151 from $155, maintains equalweight rating
  • Severn Trent: Jefferies downgrades from hold to underperform targeting GBp 2480.
  • United Utilities: Jefferies downgrades from Outperform to Hold with a target of GBp 1000.
  • Visteon:  Goldman Sachs upgrades to buy from neutral. PT up 30% to $156.
  • Wizz Air: Berenberg remains "Hold" with a price target reduced from GBp 5200 to GBp 4400.