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Summits, Russia Reopens, Durable Goods & Jobless Claims – What’s Moving Markets

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By Geoffrey Smith — A veritable orgy of diplomacy is taking place in Brussels, with the West trying to coordinate an increase in pressure on Russian President Vladimir Putin through NATO, the G7 and the EU. U.S. President Joe Biden will attend all three meetings, pressing for a more complete break with Russian energy purchases. Germany joined Europe’s other large economies in cutting fuel duties to support demand. Russia’s stock market reopened with a dead-cat bounce after three weeks, thanks to buying by the sovereign wealth fund. The ruble also gained as Putin demanded that hostile states pay for their energy in rubles, rather than dollars. In the U.S., durable goods and jobless claims are due, along with more Fed-speak. Here’s what you need to know in financial markets on Thursday, 24th March.

1. West seeks a path to more pressure on Putin 

Western leaders meet in an effort to raise the pressure on Russian President Vladimir Putin to stop the war in Ukraine.

In three summits in Brussels in the course of the day, NATO leaders are expected to announce plans to double the alliance’s forces on its eastern flank, while the G7 will warn Putin against using chemical and biological weapons to make up for the shortcomings of his conventional forces, which NATO estimates have 40,000 soldiers killed, wounded, missing or taken prisoner in the month since the invasion.

The focus, however, will be on the last of the three meetings, an EU summit which will also be attended by U.S. President Joe Biden. Biden and most EU leaders will be pressing to close the loopholes that currently allow Europe to continue buying Russian energy. Doing so would immediately increase the economic pressure on Russia, but would also likely trigger a recession, according to German Chancellor Olaf Scholz.

2. Russia reopens and the ruble strengthens

Russia’s stock market reopened for business for the first time in nearly a month. Trading was restricted to just under three dozen stocks and was dominated by purchases by Russia’s sovereign wealth fund.

The ruble-based MOEX Russia index rose by 5.1% but is still down by over 50% since October 2021, when Putin started to ramp up his pressure on Ukraine.

At the same time, the official ruble rate strengthened to under 100 to the dollar, supported by Putin’s demand on Wednesday that ‘hostile’ countries should pay for their Russian oil and gas with rubles rather than dollars or euros.

The demand will have little effect on overall foreign demand for rubles, because Russian oil and gas exporters already use their export proceeds to buy rubles to pay taxes and wages. However, it would force European buyers to transact with the Central Bank, whose foreign reserves have been frozen by previous sanctions measures.

3. Stocks set to open higher, watching for summit outcomes; FactSet, Darden results due

U.S. stock markets are set to open a little higher later, although major moves seem unlikely before the outcome of the diplomatic meetings in Brussels is known.

By 6:15 AM ET (1015 GMT), Dow Jones futures were up 97 points, or 0.3%, while S&P 500 futures were up 0.4% and Nasdaq 100 futures were up 0.5%.  All three indices had succumbed to profit-taking on Wednesday, each falling around 1.3% after a week of strong gains.

Stocks likely to be in focus later include Boeing (NYSE:BA), after the acquittal of a pilot who was on trial for misleading air safety regulators over the safety of the 737 MAX. Officials investigating the crash of China Eastern’s (NYSE:CEA) MU5375 flight earlier this week, meanwhile, said that the recovered flight recorder was damaged, raising the prospect of a slow dribble of news about what caused the crash.

GameStop (NYSE:GME) stock will also draw attention, after Boston Consulting Group sued it in an attempt to recoup $30 million in allegedly unpaid fees.  Darden Restaurants (NYSE:DRI) and FactSet report earnings before the open.

4. Durable goods, jobless claims – and more Fed-speak

The data calendar meanwhile is dominated by durable goods data for February and the weekly jobless claims numbers.

Growth in core durable goods purchases is expected to have slowed for a third straight month, while initial jobless claims are expected to inch down by a couple of thousand from last week’s 214,000.

There will also be plenty of speeches from Federal Reserve officials: St Louis’ James Bullard, Chicago’s Charles Evans and Governor Chris Waller are all due to speak in the course of the day, as increasing talk of the need to step up the pace of monetary tightening continues to hurt bond markets. The 10-Year benchmark Treasury yield is back at 2.38% after dipping as low as 2.29% overnight.

In Europe, meanwhile, regional purchasing manager indices – the first surveys to include reactions to the invasion of Ukraine – turned out better than expected, showing the Eurozone’s biggest economies continued on their post-pandemic recovery path in March. At a corporate level, however, French carmaker Renault (PA:RENA) and U.K. retailer Next both fell after Ukraine-related profit warnings, while Nestle said it will stop selling most of its popular brands in Russia.

5. Oil edges higher as Germany falls into line on tax cuts

Crude oil prices edged higher, still in holding mode along with other risk assets as the day’s summit meetings come and go.

Prices eased a little overnight amid further signs that both China and India – two of the world’s biggest importers – are making progress in schemes to circumvent Western sanctions.

By 6:30 AM ET, U.S. crude futures were up 0.1% at $115.09 a barrel, while Brent futures were up 0.2% at $121.88 a barrel.

In Europe, Germany followed the U.K., France and Italy in announcing big cuts to fuel duties in order to sustain demand, against a backdrop of record high prices for gasoline and diesel.

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