MARKET WRAPS

Watch For:

U.S. Trade for February; U.S. ISM Report on Business Services PMI for March; Canada Trade for February.

Opening Call:

Stock futures wavered Tuesday and oil prices rose as investors monitored the latest developments from the Russia-Ukraine war, including the prospect of more sanctions on Russian energy.

Ahead of the opening bell, Twitter shares gained 3%, extending Monday's 27% rise that came after Tesla Chief Executive Elon Musk disclosed he held a 9.2% stake in the social-media company.

The Russia-Ukraine war, which has roiled equity and commodity markets since February, remained in focus. Allegations of war crimes in areas formerly occupied by Russia came to the fore over the weekend, renewing the debate - especially in Europe - of further sanctions on Russian energy.

"A sense of caution has taken hold of financial markets as investors evaluate the prospects of more sanctions," said Lukman Otunuga, an analyst at broker FXTM.

In the commodity space, oil prices rose amid renewed supply fears linked to sanctions. Prices have failed to reach their peaks from the weeks after the Russian invasion, with downward pressure from President Joe Biden's announcement last week that the U.S. would release up to 1 million barrels of oil per day for the next six months.

"Crucially, the prospect of Russia's energy sector falling within the sanction crosshairs is becoming a more realistic possibility," said Tim Wessel, an analyst at Deutsche Bank.

"The U.S. also prepared a fresh round of sanctions and military aid to Ukraine, as they prepare for a renewed offensive in the east."

Monetary policy and the prospect of multiple interest-rate increases from the Federal Reserve in the year ahead continue to dominate the narrative in the market. Investors will get to digest remarks from Fed Governor Lael Brainard as well as Fed presidents Mary Daly of San Francisco and John Williams of New York in the day ahead.

Over the weekend, Daly said that a larger-than-expected, 50 basis-point rate hike was more likely. The Fed faces pressure to fight historically high inflation, and raised rates by 25 basis points in March.

More insight into the Fed's plan for tightening monetary policy will come Wednesday, with the release of the minutes from the meeting in March of the Federal Open Market Committee, the central bank's monetary policy group.

Market insight:

The housing sector in the U.S. is expected to soften markedly in the months ahead as demand slows with increasing mortgage rates, Natixis said.

However, any pullback in the construction sector should be limited considering that the stock of housing inventories is historically low, the French investment bank said.

"While prices are likely to decline, the drop will be much less than what the sector experienced around the 2008-2009 recession," Natixis said. Even though any potential fallout should have more limited consequences, residential construction is likely to be a headwind to the U.S. economy this year, it said.

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Weakness in near-term activity and confidence due to the Ukraine war isn't likely to deter central banks from tightening policy, JPMorgan said.

Policy makers are set to act anyway because the hit to economic growth from these shocks could soon fade and the consequences of inflation could persist, the U.S. bank said.

"This dynamic will keep pressure on central banks to normalize policy, especially in developed markets where earlier patience has given way to plans for more aggressive policy tightening this year and next," JPM said.

The bank sees a number of central banks accelerating their policy tightening cycles--including the Fed and the Bank of Canada--increasing the risks of an undesirably rapid decline in economic growth.

Forex:

The dollar could gain if the minutes of the Fed's last policy meeting signal more aggressive interest rate rises, FXTM said. The minutes of the March meeting, which will be published on Wednesday, are expected to offer investors fresh insight on how Fed officials view monetary policy after raising rates for the first time since 2018, FXTM said.

"Should the minutes strike a hawkish tone with policymakers discussing the possibility of a 50-basis point rate hike in May, this could boost the dollar."

The dollar will also be influenced by policymakers scheduled to speak this week including Fed Governor Lael Brainard and Philadelphia Fed President Patrick Harker among others, FXTM said.

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The euro is likely to stay weak on reports that the EU could implement new sanctions against Russia, and could weaken further depending on the harshness of the measures and their implications for energy prices, ING said.

"The euro's performance is very strictly tied to the content of new sanctions the EU looks likely to impose on Russia; the bigger the implications for the energy market, the larger the impact on the euro," ING's analysts said in a note.

Details of new sanctions may not emerge until Wednesday, while the euro is unlikely to recover from Monday's sharp falls that took it below $1.10 unless sanctions "prove milder than expected," the analysts said.

Bonds:

The yield on the benchmark 10-year U.S. Treasury note rose to 2.423% on Tuesday from 2.409% on Monday. The yield on the 2-year note rose to 2.449% from 2.426%.

Whether investors admit or not, "we have entered a bond bear market," said Saxo Bank's strategists. In this environment, bond yields are destined to increase substantially, and traditional safe havens like U.S. Treasuries will not protect investors looking to diversify portfolios, they said.

To underpin this view, Saxo said that, since the beginning of the year, U.S. Treasuries have suffered from the most significant losses compared to any year since 1974, with the weak performance attributable to investors' bets of interest-rate rises in 2022.

Years of accommodative monetary policy distorted investors' risk perception and forced them to take on more risk either through duration or credit, they said.

Commodities:

Oil ticked higher as the market waits to see whether the West will hit Russia with fresh sanctions in response to war crime reports.

Western nations have been considering how to respond to reported war crimes against Ukrainian civilians, with details expected to be released later Tuesday. France has called for a ban on Russian oil imports, but Germany has pushed against banning Russian gas imports.

"It feels right now that a complete shut off [of Russian energy imports] is going to be too painful," said Kara Murphy, chief investment officer at Kestra Holdings. "But there is a growing consensus that there needs to be more done and they need to tighten the spigot."

Gold was flat in early European trading.


TODAY'S TOP HEADLINES


Nestlé's Data Leak Shows War-Related Hacktivism Risks

Companies, already warned to remain alert to potential Russian cyberattacks, are battling operations by online activists aiming to bruise corporate reputations amid the war in Ukraine.

Recent public campaigns by the hacker collective Anonymous against Nestlé SA and other companies continuing to operate in Russia underline the increasing business risks. The high visibility of hacktivists requires extra efforts from companies in internal response and outward crisis communication, cybersecurity and risk experts said.


Shein Valued at $100 Billion in Funding Round

Fast-fashion retailer Shein was valued at $100 billion in a recent funding round, according to people familiar with the matter, making the China-based apparel seller one of the world's most valuable private companies.

The funding round, which closed last week, raised between $1 billion and $2 billion for Shein, the people said. Private-equity firm General Atlantic participated in the funding round, which included prior Shein investors Tiger Global Management and Sequoia Capital China.


Roblox Awards CEO Pay Package Valued at More Than $230 Million

The boss of Roblox Corp. received a pay package that the videogame company valued at $233 million last year, instantly putting him in the ranks of the country's top-paid chief executives, a Monday Securities filing showed.

David Baszucki, co-founder and chief executive officer of Roblox, had received just $6.8 million in 2020. Most of his 2021 package is made up of restricted stock dependent on the company meeting certain milestones, a common retention tool that underscores how some executives can end up with big payouts.


Elon Musk's Twitter Investment Raises New Regulatory Red Flag

Elon Musk has set the stage for a new fight with the Securities and Exchange Commission, this time over how he disclosed his investment in Twitter Inc. that has made him the company's largest investor.

The Tesla Inc. chief executive disclosed his 9.2% holdings in a form investors are required to file when they buy more than 5% of a company's stock, without planning to seek control. But the notice came several days late. It also didn't include a standard certification that underscores an investor's passive status.


Exxon expects profit bump in Q1

Exxon Mobil Corp. said in a filing late Monday that its first-quarter profit could top $9 billion, thanks in part to billions more from rising crude prices.

Exxon XOM estimated between $1.9 billion and $2.3 billion over fourth-quarter profit due to crude-price changes and up to about $400 million in gas-price changes.


Envision Lenders Hire Legal Adviser as Group Prepares Counter Financing Offer

A group of Envision Healthcare Corp.'s lenders hired law firm Kasowitz Benson Torres LLP while exploring a potential financing deal with the company, in a bid to counter alternative debt proposals that could weaken these creditors' claims on assets.

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04-05-22 0617ET