June 30, 2022

Stocks Next Week: The Invasion of Ukraine Changed Everything on Wall Street

Stocks Next Week: The Invasion of Ukraine Changed Everything on Wall Street

A version of this story first appeared in the CNN Business “Before the Bell” newsletter. Not a subscriber? You can register here. You can listen to an audio version of the newsletter by clicking on the same link.


London
CNN Business

Russian President Vladimir Putin The decision to invade Ukraine last week It shattered the security system in Europe that had been in place since the end of the Cold War. It also forces investors to consider whether they need to adapt to a world that has changed forever.

“I think the Russian invasion of Ukraine represents nothing less than a shift away from the largely US/Western-dominated global order that has prevailed since the fall of the Berlin Wall,” said Michael Strubek, chief global investment officer at Credit Suisse. In a note to clients on Friday.

Before Russian forces landed on Ukraine, the spark erupted punish penalties Of the shocked countries in the West, the primary concern on Wall Street was not with Putin, but with Federal Reserve Chairman Jerome Powell.

What the Fed will do next to rein in inflation, which has been rising at the fastest rate in decades, has been the subject of fierce speculation. Increasingly, traders are preparing for the Federal Reserve to aggressively raise interest rates from rock bottom and begin reducing the size of its massive balance sheet, which it has created to support the economy during the pandemic.

Governor Christopher Waller Thursday Make the case for an excessive potential rise of 0.5 percentage points in March “say [policymakers’] The determination to tackle high inflation, about which there should be no doubt.”

But even this decision may be influenced by what is happening now in Ukraine.

Waller continued, “It is possible that the state of the world will be different in the wake of the Ukraine attack, and that may mean that a more moderate tightening is appropriate, but that is not yet clear.”

On the one hand, inflation It is expected to rise in the near term As a result of the invasion, which drove up energy prices and disrupted the market for major agricultural products such as wheat and corn. On the other hand, the Fed does not want to raise interest rates too quickly and cause a recession.

“It would put them in a slightly more awkward position,” said Lee Ben-May, director of global macro research at Oxford Economics.

However, according to Strubik, what changed when Russia invaded Ukraine goes well beyond the Federal Reserve.

“Russian President Vladimir Putin intends to reposition Russia as a strong country whose strength depends on its energy and commodity resources as well as its army,” he said. This is likely to have major implications for security arrangements in Europe and the world.

Moreover, Strobek continued, other world powers such as China are watching closely to see how the conflict is developing and how the West is reacting.

“We are now moving into a new multipolar world,” he said.

This means that investors will have to think differently about how to deploy their resources.

“With the dawn of a new world order, investors must choose their asset allocations carefully,” Strubek said. “Regular and robust investment processes and pre-investment due diligence measures will become even more important. Active investment will become even more important given the potential to alter economic, political and social developments in individual regions.”

International companies with a large presence in Russia are preparing for more sanctions from Western countries.

Russia has already paid a price for its aggression. The country’s stock and currency markets fell last week after Putin ordered troops into Ukraine.

Sanctions were intensified by the United States and European countries with leaders of Western countries condemning Russia’s actions. Putin warned Russian businessmen on Thursday that he expected more “restrictions” on the economy, but called on businessmen to act “in solidarity” with the government.

Here are some western companies that can be disturbed.

BP: British oil company BP is Russia’s largest foreign investor with a 19.75% stake in the country’s national oil company Rosneft. It also owns stakes in several other oil and gas projects in Russia.

Danone: French yogurt maker Danone controls the Russian dairy brand Prostokvanhino and gets 6% of all sales from the country.

ExxonMobil: The American oil giant has more than 1,000 employees in Russia, and has been in the country for more than 25 years. Its subsidiary Exxon Neftegas Limited owns a 30% stake in Sakhalin-1 – a huge oil and natural gas project located off Sakhalin Island in the Russian Far East. It has operated the project since 1995 on behalf of a consortium that includes Japanese and Indian partners, as well as two Rosneft subsidiaries.

McDonald’s: The burger chain has ranked Russia as a high-growth market and has continued to open locations there over the past decade.

Mondelez: Oreo maker and owner Cadbury became Russia’s leading chocolate maker in 2018.

Monday: India GDP data; Earnings from Lordstown Motors, Groupon

(GRPN)
HP

(HP)
SmileDirectClub

(SDC)
video zoom

(ZM)

Tuesday: US and China manufacturing data; Earnings from AutoZone

(AZO)
Baidu, Domino’s Pizza

(domex)
hostess brands

(TWNK)
GM Smoker, Coles

(KSS)
targeting

(TGT)
AMC Entertainment

(AMC)
and Salesforce

(CRM)

Wednesday: European inflation data. Earnings from Abercrombie & Fitch

(ANF)
Dane Brands

(DIN)
dollar tree

(DLTR)
Snowflake and Victoria’s Secret

Thursday: ISM non-manufacturing index; Earnings from Best Buy

(BBY)
Weibo, Costco

(cost)
and answered

(GPS)

Friday: US jobs report