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Sign in front of the offices of JP Morgan Chase & Co. seen in New York, USA, March 29, 2021. REUTERS / Brendan McDermid

LONDON, March 2 – Sanctions imposed on Russia have significantly increased the country’s chances of failing to repay its debt in dollars and other international markets, analysts at JPMorgan and others warned on Wednesday.

Russia has over $ 700 million in government bond payments this month. Although in theory there are sufficient reserves to cover the debt, in practice the freezing of some assets and other measures may affect its ability to make payments. Read more

“Sanctioning Russian government structures in the United States, countermeasures in Russia to restrict payments abroad and disrupting payment chains are major obstacles for Russia to make payments on bonds abroad,” JPMorgan said in a note to customers.

“Sanctions … have significantly increased the likelihood of the Russian government’s defaulting on hard currency.

The central bank and the finance ministry did not respond to a Reuters request for comment on the possibility of default.

The first date of the crisis, analysts at JP Morgan said, was March 16, when two bond coupons were paid, although as much of Russia’s debt they have built-in 30-day “grace periods” that would repel any formal moment. default April 15.

Russia has just under $ 40 billion in debt on the international market or “hard currency,” as it is known. Although this is a small amount for an economy important to Russia, any missed payment will trigger a chain of events.

Major credit rating agencies such as S&P Global, Moody’s and Fitch, which had investment grade ratings for Russia until last week, will downgrade it en masse.

JPMorgan estimates that about $ 6 billion in credit default swaps (CDS) that bondholders have purchased as insurance policies will also have to be repaid, although the process could be complicated in the event of further sanctions. long.

Concerns about the failure followed a warning from the Institute of International Finance (IIF) this week, which indicated that approximately half of Russia’s $ 640 billion in foreign exchange reserves had been effectively frozen by international sanctions. Read more

Capital Economics also warned on Wednesday of growing risks of default. It says it will hit mostly international investors – foreigners held $ 20 billion in Russian government debt denominated in dollars and rubles late last year, according to Russia’s central bank – although that would further damage Moscow’s reputation. international markets.

“The likelihood that the government and companies are unable or unwilling to repay foreign debt has increased significantly,” Jackson said.

Report by Mark Jones Edited by Karin Strohecker and Mark Potter

Our standards: ‘ principles of trust.

Large energy consumers are boycotting Russian oil following Moscow’s invasion of Ukraine in actions that helped raise oil prices above $ 113 a barrel on Wednesday.

OPEC’s continued opposition to calls for increased oil production has added to the pressure to raise prices, after the group said it was sticking to a plan agreed last year to gradually reverse pandemic cuts.

Demand for Russian oil has plummeted since the attack on Ukraine began as refineries, banks and shipowners avoid the country’s vast commodity market. The consulting company Energy Aspects said that 70% of Russian oil is “working hard to find buyers.”

Energy markets have been largely spared sanctions by the United States, the European Union and the United Kingdom against Russia’s financial sector, but typical buyers are effectively self-sanctioning themselves by starting a race to secure alternative supplies in an already tight market.

“Most European large companies do not touch Russian oil and only a few European refineries and trading companies are still on the market, but high freight rates and military insurance premiums significantly complicate transactions,” Energy Aspects said. “Several shipowners are reportedly reluctant to make reservations from the Baltic or the Black Sea due to a lack of military insurance.

Despite the suspension of Russian exports, the OPEC + alliance, which includes Russia, has said it will not extend a plan agreed last July to increase monthly production by 400,000 barrels a day. As oil prices have risen since August, reaching an eight-year high, the United States and other major oil consumers have repeatedly called on the cartel to increase production faster to help ease inflation.

The latest rise in prices was caused by “current geopolitical events” and not by changes in market fundamentals, OPEC + said, confirming that it would continue with the current plan in April.

Brent crude, international oil, rose nearly 8 percent to more than $ 113 a barrel on Wednesday.

As a sign that pressure on raw materials is not limited to oil, European natural gas prices rose 50 percent on Wednesday to a record 185 euros per megawatt-hour.

German Economy Minister Robert Habek said on Wednesday that the worst-case scenario “has not yet materialized” and Russia is still sending gas. But he added that the country needs to be prepared and may need to maintain coal-fired power plants as a reserve. Russia supplies about 40 percent of European gas.

Russia is the world’s third-largest oil producer after the United States and Saudi Arabia, and typically exports about 7.5 million barrels a day, as well as other energy products. Europe is the largest home for Russian crude oil, with about 53 percent of it ending up there, according to ING. Asia is another significant buyer, with 39 percent going to the region.

Russia’s leading Urals oil is a staple for refineries in northwestern Europe and the Mediterranean. The buyers are Germany, Italy, the Netherlands, Poland, Finland, Lithuania, Greece, Romania, Turkey and Bulgaria, according to S&P Global Platts, a commodity price reporting agency.

However, a number of European refineries, including Finland’s Nestlé and Preem in Sweden, are abandoning Russian classes and seeking supplies elsewhere. There are also reports of Indian refineries asking traders to supply non-Russian supplies.

The Urals traded at a discount of more than $ 18 a barrel on Wednesday against the physical Brent in northwestern Europe, a record for the post-Soviet era.

“Differences in oil prices reflect a clear reluctance to take Russian oil and there is still a risk of new sanctions that could indirectly or directly affect oil purchases or supplies,” said Shin Kim, head of supply and production analysis. S&P oil.

Michael Tran, an analyst at RBC Capital Markets, said traders face difficulties in obtaining letters of credit – bank documents used on behalf of the buyer that act as a guarantee to pay the seller – to buy Russian oil.

“This is likely to remain the case as potential buyers struggle to secure guarantees from banks,” he said. “Tanker tariffs are [soaring] while consumer countries are struggling to provide physical barrels elsewhere.

The United States and other major energy-intensive countries agreed on Tuesday to release 60 million barrels of oil from their emergency stockpiles to address fears of disruptions to Russian supplies.

However, traders and analysts said the move was far below the levels needed to calm the market. “As a one-off crude oil spill, it is clogged by the sheer magnitude of Russian export disruptions,” said Ehsan Homan, head of MUFG’s emerging markets research.

“Critically depleted market stocks and declining levels of spare capacity in the face of record-breaking unresolved deficits ultimately leave a lever for rebalancing oil markets – destroying demand.

OPEC and its allies, including Russia, are due to meet later Wednesday to discuss production levels. Despite the turmoil in the oil markets, the cartel is expected to stick to its plan to increase production by 400,000 barrels per day in April. Other Russian-oriented goods were also boosted by the conflict in Ukraine, with aluminum trading at a record high on Wednesday and grain prices rising.

Confirming rumors that have been circulating for months, Ford has announced that it is splitting into “two separate but strategically interdependent automotive businesses” called Ford Blue and Ford Model E. While Ford Blue will drive all legacy cars with internal combustion engines. , The Ford Model E is its boost in electric vehicles with products such as the Mustang Mach-E and Ford F-150 Lightning.

Former Tesla and Apple CEO Doug Field will serve as CEO of Ford Model E’s electric cars and digital systems. He was hired by Ford last fall after leaving Tesla in 2018 and working on Project Titan’s autonomous electric vehicle. Apple for several years. Field is responsible for creating products in the Ford Model E, as well as software and embedded systems in both units.

In addition to product development, the new structure will deal with another problem with many EVs with vaporware – it actually sells them to customers. The Model E unit will “create an exciting new shopping, buying and owning experience for future electric vehicle customers, including simple, intuitive e-commerce platforms, transparent pricing and personalized customer support from Ford ambassadors.”

While Galhotra and Farley told investors that Ford would stick to the North American franchise, the company also plans to get dealers to “choose” a new setup with a redesigned, standardized customer experience and transparent pricing. It also includes something that the shortage of chips has introduced car buyers – without inventory. They did not provide details on how this would affect commissions and other aspects of the dealership, even when Farley said dealers should be “ready to specialize.”

Ford Model E takes a clean slate approach to the design, manufacture and delivery of electric cars with “always-on” connected experiences, in ways that will significantly change Ford’s internal structure and the way things work for your local car dealers . While electric car companies like Tesla still dominate the segment, Ford and other legacy carmakers are still talking about big plans to catch up. On Tuesday, Stellantis showed an image of an electric jeep as it unveiled the Dare Forward 2030 plan to meet electrical and software commitments, and GM said it would invest $ 35 billion by 2025 to build electric and autonomous vehicles.

Company executives described the split as “how we will win as a company” as they implement Ford’s EV boost plans, which were originally unveiled last May. The carmaker decided not to try to separate the new device only for EV as a special acquisition company (SPAC).

Ford President and CEO Jim Farley will also be President of Model E, while Kumar Galhotra, President of Ford, America and International Markets, will be President of Ford Blue.

Photo by Amelia Holovati Krales / The Verge

The carmaker also plans to cut its $ 3 billion in gas costs over the next four years, which Farley and Galhotra have confirmed will include layoffs, although Ford Model E puts high priority on attracting “the best engineering software.” design and UX talent. ” Ford Blue will be subject to reduced “complexity” and “manic cost reductions” as the company invests $ 5 billion in electric vehicles in 2022 alone. over the next four years.

But she added that President Joe Biden did not want to “bring down global oil markets or the global market, or influence the American people more with higher energy and gas prices.”

According to analysts at Commerzbank, Russia’s leading oil, Urals, was trading at a $ 18 a barrel discount on Brent oil on Wednesday as buyers avoided Russian exports. The concession was not so great after the collapse of the Soviet Union, analysts say.

“Differences in oil prices reflect a clear reluctance to take Russian oil and continue to exist [a] the risk of more sanctions that could indirectly or directly affect oil purchases or supplies, ”said Shin Kim of S&P Global Commodity Insights, head of analysis of oil supply and production.

The massive rise in prices comes despite Western efforts to calm markets and risks further fueling already rising global inflation. On Tuesday, the United States and 30 other members of the International Energy Agency approved the release of 60 million barrels of emergency oil stocks, which will cover approximately two weeks of Russian oil supplies.

“The bottom line is that this is not enough to cool the market. It’s a small band-aid solution,” said Michael Tran, managing director of global energy strategy at RBC Capital Markets.

Huge price increases will make fuel more expensive around the world, increasing the cost of travel and commuting. They will also contribute to inflation and could stifle economic growth, complicating global central bank decisions while trying to counter rising prices.

Investors fear that Russia’s energy exports will be limited or halted as a result of the conflict in Ukraine – a key pipeline route, additional Western sanctions that could target the heart of the Russian economy, or Moscow’s retaliation.

“For Russian oil, there is an evaporation of interest rates on purchases,” said analysts at Commerzbank. “The market seems to be increasingly priced when Russian oil supplies are cut off,” they added.

According to Alex Froley, a market analyst at the Independent Commodity Intelligence Services, Russian natural gas continues to flow to Europe. But there is “a lot of uncertainty and concern about how things can change,” he said.

Froley noted that the United Kingdom has banned Russian-owned and controlled ships from its ports, which could disrupt Russian liquefied natural gas supplies, which account for between 3% and 4% of the country’s gas supplies.

“Traders may be worried about whether continental Europe is introducing a similar ban on Russian ships,” he said.

OPEC on the sidelines

The Organization of the Petroleum Exporting Countries and allied producers, including Russia, agreed on Wednesday to stick to their plan to gradually add oil to the market, opposing pressure from developed economies to do more to ease prices.

The Saudi-led group, called OPEC +, said in a statement that it would increase production by 400,000 barrels a day in April, a small fraction of Russia’s 10 million barrels a day of crude oil.

“The current fundamentals of the oil market and the consensus on its prospects point to a well-balanced market and that the current instability is not caused by changes in the market fundamentals, but by current geopolitical developments,” said OPEC +.

Nuclear talks between Iran and the United States could place more Iranian barrels on the market, but that will not ease the situation in the near future.

Get out of Russia

Many of the world’s largest oil companies are leaving Russia or halting new investments in exploration and development projects.

ExxonMobil said on Tuesday that it was abandoning its latest project in the country, Sakhalin-1, which has been declared “one of the largest single international direct investments in Russia”. A subsidiary of Exxon was the operator of the project and the company’s decision to withdraw will end its presence in Russia for more than 25 years.

BP, Shell and Norwegian Equinor said this week that they intend to leave their Russian business in the event of a billion-dollar blow to their balance sheets. French TotalEnergies has stopped new investments.

– Mark Thompson and Julia Horowitz contributed to the report.

The Dow Jones Industrial Average rose 250 points on Wednesday after comments by Fed chief Jerome Powell showed that the Federal Reserve was still ready to raise interest rates despite Russia’s invasion of Ukraine. Government bond yields recovered after two days of sharp losses. Energy stocks traded briskly as oil prices sparked by the Russia-Ukraine conflict briefly rose above $ 112 a barrel.

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After the end of Tuesday, Dutch Bros (BROS) and Salesforce (CRM) were among the companies reporting their quarterly results. Shares of BROS fell 3% early on Wednesday, while shares of Salesforce jumped nearly 4% in morning trading. Meanwhile, a chain of discounts Dollar tree (DLTR) reported mixed results early Wednesday as shares fell 4% after opening.

Among the leaders of the Dow Jones, Apple (AAPL) increased by 0.7% and Microsoft (MSFT) traded 0.6% on today’s stock market. UnitedHealth (UNH), a Dow Jones stock you should watch, is approaching a new buying point.

Leader of electric vehicles Tesla (TSLA) rose about 1% on Wednesday, looking to recover from a 0.75% drop on Tuesday.

Against the backdrop of a volatile market driven by titles, Commercial metals (CMC), Northern oil and gas (NOG), Palo Alto nets (PANW) and Specialty Ryan (RYAN) are among the best promotions to watch on Wednesday. Keep in mind that the current conditions of the stock market must keep investors in cash and on the sidelines.

Microsoft and Tesla are shares of IBD Leaderboard. Commercial Metals was introduced in the stock column near the buying area this week. Ryan Specialty is the leader of the IPO.

Dow Jones today: head of the Fed Powell, Russian invasion

Following the opening of the market on Wednesday, the Dow Jones Industrial Average traded up 0.8%, while the S&P 500 rose 0.9%. Nasdaq rose 0.65% in morning trading. Among exchange traded funds, the Nasdaq 100 Invesco QQQ Trust (QQQ) rose 0.5% and the SPDR S&P 500 ETF (SPY) rose 0.6% after opening Wednesday.

Yields on 10-year bonds rose to 1.78% on Wednesday morning. On Tuesday, the yield on 10-year bonds closed at 1.71% after sinking for a second consecutive session. On February 15, 10-year government bond yields peaked at more than 2.06%, their highest level since August 2019. US oil prices, meanwhile, rose more than 7% on Wednesday in response to reluctance among world oil traders to buy Russian oil. West Texas Intermediate crude traded shortly above $ 112 a barrel.

Federal Reserve Chief Jerome Powell will testify before Congress on Wednesday and Thursday at 10 a.m. ET. As inflation rises and the Federal Reserve is so behind the curve, there are concerns on Wall Street that politicians may not feel a small choice not only to continue tightening rapidly, but also to potentially boost interest rates. The head of the Fed Powell can use his testimony to allay this concern.

In comments, Powell said: “We will use our political instruments as appropriate to prevent higher inflation, while promoting sustainable expansion and a strong labor market. We have gradually discontinued our net asset purchases. With inflation well above 2% and a strong labor market, we expect it to be appropriate to raise the target range for federal interest rates at our meeting later this month. “

In Ukraine, Russian forces continued to bomb the country’s second-largest city, Kharkiv, in a bid to demoralize defenders amid an apparent change in military strategy.

ADP, meanwhile, said companies added 475,000 jobs in February, better than Econoday’s estimate of 320,000 new positions. The ADP employment report is calculated monthly as a precursor to non-agricultural wages by the Ministry of Labor. This report is due out on Friday.

Stock market adjustment

The stock market performed weak on Tuesday as major stock indexes sold out at a big loss. Despite the weakness, Wednesday will be Day 5 of the ongoing rally experience, which means that the next day – a signal for the start of a new uptrend – is possible at any time. Against the background of the current instability, it is important to read and follow the IBD’s Big Picture column.

On Tuesday, The Big Picture commented: “With more stocks falling and rising, being a successful stock picker today probably means you’re laser-focused on a handful of sectors that are actually rising. the broad decline. “

If you are new to IBD, consider looking at its stock trading system and the basics of CAN SLIM. Recognition of chart patterns is one of the keys to investment guidelines. IBD offers a wide range of lists of growth stocks, such as Leaderboard and SwingTrader.

Investors can also create watch lists, find companies approaching a point of purchase, or develop custom screens at IBD MarketSmith.

Four Dow Jones stocks to watch now

Dow Jones Profits: Salesforce

Shares of Salesforce rose nearly 4% early Wednesday after the company surpassed quarterly earnings and sales on Wall Street. The earnings guidelines for the enterprise software maker were above expectations, but estimates of its profits were missed.

Shares of CRM closed on Tuesday with more than 30% of its 52-week high. Stocks are well below their 50- and 200-day moving averages.

Dow Jones shares to monitor: UnitedHealth

UnitedHealth is building a double-bottom base that offers a 501.03 purchase point. Shares ended just below their 50-day moving average on Tuesday after rising 0.1%. UNH shares traded 0.5% higher on Wednesday.

The upward line of the relative strength of the shares is just at new highs, which shows a significant superiority in the stock market.

Four stocks with the highest growth to see this yearrent. Stock market adjustment

Watching Shares: Commercial Metals, Northern Oil, Palo Alto, Ryan Specialty

Texas-based Commercial Metals, a manufacturer of metal products for the construction industry, is trying to surpass the buying point of 38.82 in consolidation. The shares are about 3% below the entrance, after the shares exploded briefly on Tuesday. The purchase area of ​​5% increases to 40.76. The CMC availability shows 98 of the perfect 99 IBD Composite Rating, to check the IBD Stock. Shares of CMC rose 2.5% on Wednesday morning.

Northern Oil & Gas is breaking above the point of buying a cup with a handle of 25.57, according to an analysis of the chart of IBD MarketSmith. Shares of NOG rose 3% on Wednesday.

Cybersecurity leader Palo Alto Networks is holding on to a consolidation point of 572.77 after a nearly 3% drop on Tuesday. The buying area of ​​5% reaches 601.41. The RS line reached a new peak on the day of the breakthrough. Last week, the company reported strong profits and sales. Palo Alto shares remained unchanged early Wednesday.

IPO leader Ryan Specialty was trying to surpass the 40.65 buy-in double-bottom handle, but turned sharply lower on Tuesday. Last week, IPO shares found strong support around their 50-day line. Shares of RYAN rose 1% on Wednesday morning.

Join IBD experts as they analyze leading stocks in the current IBD Live stock market adjustment

Tesla shares

Shares of Tesla rose about 1% on Wednesday morning, trying to recover from losses on Tuesday. Shares resolutely regained their long-term 200-day line during a jump on Monday. Now look for the shares to continue your upward movement on the right side of a new base. The next key test for stocks could be the 50-day line, which is about 10% above its current price. Re-assuming this line would be upward for the stock-based building process, while strong resistance could signal a long-term period of consolidation.

The shares traded up to 1243.49 on November 4, but ended on Tuesday with about 31% of this highest peak of all time.

Leaders of Dow Jones: Apple, Microsoft

Among the shares of Dow Jones, Apple is building a double-bottom base with 176.75 points to buy, according to an analysis of the chart of IBD MarketSmith. The shares are about 7% away from the new point of purchase. Shares of AAPL found support in their long-term 200-day line last week, but remain below their 50-day moving average. Shares of Apple rose 0.7% on Wednesday.

How Dow Jones shares cope with the potential resistance on the 50-day line will be key to the likelihood of a breakout. If stocks find stable stability, then a longer period of consolidation is likely. However, if the shares resolutely regain this level, then the breakthrough may be on the near horizon. So far, Apple shares are about 5% below the 50-day line, so there is some time before a potential test.

The relative strength of the shares remains close to the last peaks in the face of stock market weakness, which means that institutions are hesitant to sell their shares to Apple.

Software leader Microsoft fell 1.3 percent on Tuesday, breaking a three-day winning streak. The leader of software, Dow Jones, is just below the long-term 200-day line as he continues to build a base. Shares of MSFT rose 0.6% on Wednesday.

Don’t forget to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more information on the growth stocks and the Dow Jones Industrial Average index.

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Others believe he will look to keep all opportunities open, given how fast the situation in Ukraine is developing.

“Once markets calm down, the Fed’s main consequence of geopolitical tensions will be a resumption of inflationary pressures through higher energy prices and recently disrupted supply chains,” Citigroup told customers. The bank believes that Powell will leave the option for a larger increase “on the table”.

Breaking things down: Powell’s testimony will be an important opportunity to give investors some clarity after last week’s turbulence.

The focus will be not only on interest rate prospects, but also on the future of the Fed’s huge bond-buying program, another lever it uses to bolster the economy. The Fed will complete the purchase of tens of billions of dollars in securities earlier this month.

This means that the Fed must be careful about raising interest rates or taking steps to reduce assets on its balance sheet in the event of a recession or new market turmoil.

That’s why the road ahead is so murky. Robert Sears, chief investment officer at Capital Generation Partners, said that if there was any indication that the markets were not functioning properly, the Fed could even start raising its balance sheet from approximately $ 9 trillion again.

“With any risk of infection in the system, you’ll probably see the balances widen,” Sears told me. “There is a will to support the system.”

Oil prices jump above $ 110 a barrel as fears grow

Global crude oil prices rose above $ 110 a barrel, and natural gas prices jumped to a new European record on Wednesday as Russia’s escalating military campaign in Ukraine sparked market fears.

Brent crude futures, the global benchmark, rose nearly 6% to $ 110.90 a barrel at 5:30 a.m. ET. US oil futures are trading at a slight discount of $ 109.30 per barrel. In Europe, the wholesale price of natural gas rose by as much as 60% to a record high of 194 euros ($ 215) per megawatt-hour.

Russia’s energy wealth has not been directly targeted by Western sanctions imposed after the invasion of Ukraine. But Moscow is finding it harder to sell supplies of Russian crude oil to traders and refineries worried they will be caught by the effects of sanctions on the financial system.

Tanker operators are wary of the risk to ships in the Black Sea, and major global oil companies are abandoning operations in the country.

According to analysts at Commerzbank, Russia’s leading oil, Urals, was trading at a $ 18 a barrel discount on Brent oil on Wednesday as buyers avoided Russian exports.

“Differences in oil prices reflect a clear reluctance to take Russian oil and continue to exist [a] the risk of more sanctions that could indirectly or directly affect oil purchases or supplies, ”said Shin Kim of S&P Global Commodity Insights, head of analysis of oil supply and production.

Natural gas flows from Russia to Western Europe continue normally, according to Alex Froley, a market analyst at Independent Commodity Intelligence Services. But there is “a lot of uncertainty and concern about how things can change,” he told me.

What happens next? The massive rise in prices comes despite Western efforts to calm markets. On Tuesday, the United States and 30 other members of the International Energy Agency approved the release of 60 million barrels of emergency oil stocks, which will cover approximately two weeks of Russian oil supplies.

The Organization of the Petroleum Exporting Countries is scheduled to meet with allied producers, including Russia, on Wednesday, as the group is under strong pressure from the West to dramatically increase production. But the Saudi government said on Tuesday that it believes OPEC + should stick to its plan to gradually increase production.

Shipping companies will no longer sail to Russia

Two of the world’s largest container companies are suspending cargo reservations to and from Russia, another strain on the country as its economy comes under enormous pressure from Western sanctions.

“As the stability and security of our operations are already directly and indirectly affected by sanctions, Maersk’s new reservations to and from Russia will be suspended, with the exception of food, medical and humanitarian supplies,” shipping giant Maersk said in a statement. Tuesday.

“We are deeply concerned about how the crisis continues to escalate in Ukraine,” the company added, noting that it has begun to see an effect on global supply chain flows, such as delays, detention of goods by customs in various transhipment centers. , unpredictable operational impacts. “

MSC, a Swiss container company, also said it would suspend all cargo reservations to and from Russia from Tuesday.

Why it matters: These companies were not required to stop sailing under Western sanctions against Russia. But this is an additional sign that companies are interested in severing business ties with the country. There are risks to their corporate reputation and concerns about receiving payments from Russian banks under pressure.

The transition from shipping companies will also increase tensions on the Russian economy, preventing the import of key goods.

“The country has already been cut off from much of the globe’s shipping capacity,” Hargreaves Lansdown analyst Susanna Street said in a research note.

Next

Also today: Fed Chairman Jerome Powell testifies before the House Financial Services Commission at 10 a.m. ET.