Global markets were volatile last week following Russia’s invasion of Ukraine. US stocks climbed before closing on Friday, but futures are falling again now, suggesting the tension is far from over. 

Russia continued its advance into Ukraine over the weekend, with reports of fighting on the streets and forces encircling Kyiv. President Vladimir Putin on Sunday put his country’s deterrence forces, which reportedly include nuclear capabilities, on high alert in response to international backlash to Russia’s invasion.

Dow futures dropped 659 points. S&P 500 futures fell 2.43% and Nasdaq 100 futures lost 2.64%. US and global equities experienced volatile trading last week as geopolitical tensions between Russia and Ukraine escalated. Early Thursday morning local time, Moscow launched military action in Ukraine.

Throughout the weekend, the Russian advance into Ukraine continued. Russian military vehicles entered Ukraine’s second-largest city Kharkiv with reports of a fight taking place and the residents being alerted to stay in shelters.

Russian President Vladimir Putin put his country’s nuclear deterrence forces on high alert Sunday amid a growing global backlash against the invasion. Ukraine’s Defense Ministry said representatives for Ukraine and Russia have agreed to meet on the Ukraine-Belarus border “with no preconditions."

Potential sanctions to watch 

Last week, President Joe Biden reacted to the attack by announcing several rounds of sanctions on Russian banks, on the country’s sovereign debt, and Putin and Foreign Minister Sergey Lavrov. 

The US, European allies, and Canada agreed Saturday to remove key Russian banks from the interbank messaging system, SWIFT. Some Russian banks removed from SWIFT (energy transactions exempt), and the freezing of the Russian central bank’s access to its foreign currency reserves held in the West increases economic tail risk.

According to Reuters, the Russian ruble fell at least 19%, with banks offering it at about 100 rubles per dollar, and it closed Friday at 84 rubles per dollar.

Traders will be watching for any signs of resolution on the Russian crisis, negotiated peace, or a sign of a near-term victory for either side or signs that tensions could be worsening and lead to the chance of a world war involving NATO members.

Impact on Fed policy

Federal Reserve Chairman Jerome Powell testifies before Congress twice in the coming week and will be followed closely for any signal on whether geopolitical events are likely to impact Fed rate hikes.

The Federal Reserve preferred measure of inflation hit a new 38-year high in January, as strong consumer demand and pandemic-related supply constraints propelled price gains.

The Commerce Department personal-consumption-expenditures index measure of core inflation excludes volatile food and energy costs, rose 5.2% in January from a year ago, up from 4.9% in December. That marks the sharpest 12-month increase since April 1983.

Rising food prices are emerging as a significant headwind to the economic recovery from the pandemic this year, particularly in developing countries where food accounts for a principal share of household consumption. Russia's invasion of Ukraine could make those headwinds even stronger.

According to economists, the price of basic staples such as wheat, corn, and soybeans rose steeply last year, portending higher grocery prices for consumers worldwide this year. Consumer food prices tend to lag behind commodity prices by several months. Even if food commodity inflation slows, as many forecasters expect, households will still face higher grocery bills in the months ahead.

Poorer countries will feel the effect of food price inflation most sharply, as food can account for up to half of the household's budget in these areas, but less than 15% in developed countries.

That could widen the gap in economic performance between poorer countries and richer ones. The latter has already recovered faster from the pandemic, thanks to better vaccine access and generous fiscal stimulus from the government, according to a recent report by the World Bank.

Investors will get an update on the labour department this week, starting with the February jobs report on Friday that showed 467,000 payrolls added in January.


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