By Geoffrey Smith
Investing.com -- Risk assets rise and havens fall as peace talks between Russia and Ukraine appear to get closer to a major breakthrough. European economic data remain alarmingly weak, however. U.S. house price figures and the Labor Department's monthly Job Openings survey are due, as are earnings from Lululemon (NASDAQ:LULU) and chipmaker Micron (NASDAQ:MU). Oil edges higher as OPEC and its allies prepare for another phantom production increase. Here's what you need to know in financial markets on Tuesday, 29th March.
1. Peace talks make progress
Peace talks between Russia and Ukraine appeared to be on the verge of a breakthrough. Diplomatic negotiations between the two sides resumed in Istanbul earlier and an aide to Ukraine’s President Volodymyr Zelensky promised a statement “in several hours.”
At the same time, Russia’s Defense Minister Sergei Shoigu announced that Russia had achieved its main objectives with what it calls a “special military operation,” namely the degrading of Ukraine’s military capability and the ‘liberation’ of eastern Ukraine’s Donbas region, part of which had seceded with Russia’s assistance eight years ago.
Western officials have expressed suspicion that Russia may only be using the peace talks to buy time to regroup, having suffered far higher casualties than expected over the last month. However, Kremlin spokesman Dmitry Peskov was quoted by newswires as saying that the fate of the talks could be decided “today or tomorrow.”
2. Europe makes strong gains on peace hopes
European assets responded strongly to the signs of progress toward a diplomatic settlement, while safe haven assets retreated.
By 6:15 AM ET (1015 GMT), the euro had gained 0.6% against the dollar to $1.1042, while European stock markets were up by as much as 2.3%. The Euro Stoxx 50 advanced 2.2%. Gold futures, by contrast, touched a two-week low of $1,906 an ounce before recovering slightly to trade at $1,913, down 1.4% on the day.
The biggest gainers included stocks that are directly dependent on supplies of Russian gas for their operations. German chemicals giant BASF (DE:BASFN), one of whose board members warned that it might have to shut its Ludwigshafen headquarters even if Russian gas supplies only fall by 50%, saw its stock rise by 3.8%. Russia has threatened to suspend deliveries if European buyers don’t agree to pay in rubles from the end of the month. G7 Energy Ministers roundly rejected the demand on Monday.
3. U.S. Stocks set to open higher; Lululemon, Micron eyed - as well as Fed speakers
U.S. stock markets are set to open higher later, supported by the more friendly global tone, but with one eye on the day’s round of speeches from Federal Reserve officials. New York Fed President John Williams and his Philadelphia counterpart Patrick Harker are both due to speak in the course of the day.
By 6:20 AM ET, Dow Jones futures were up 134 points, or 0.4%, while S&P 500 futures were also up 0.4%, and Nasdaq 100 futures were up 0.3%.
There’s a reasonably full data calendar, with house price data due at 9 AM ET, and the Labor Department’s monthly job openings survey and the Conference Board’s consumer confidence index at 10 AM ET.
Stocks likely to be in focus include Apple (NASDAQ:AAPL). Apple's streaming win at the Oscars on Sunday is sustaining its longest winning streak in years despite signs that it’s struggling with weakening consumer demand, as rises in the cost of living leave less money available for its premium-priced products.
Micron and Lululemon report earnings.
4. Europe still low on confidence as cost of living hits
Cost of living issues were unmistakably at work in data releases overnight, with sharp drops recorded in German and French consumer confidence in March. Food and energy prices have risen markedly in recent months, and consumers tend to attribute more importance to items that are bought frequently.
Elsewhere, the U.K. reported the biggest monthly rise in over five years in household borrowing, suggesting that consumers are rapidly running down their pandemic-era savings as inflation runs at the highest rate in 30 years. Mortgage approvals and mortgage lending both resumed their downward trends, too, falling well short of expectations.
British consumers at least had the entertaining spectacle of the Metropolitan Police handing out fixed penalty notices to Downing Street officials who had organized a series of lockdown-busting parties during the pandemic. The Met refused to name any individuals involved, although newspapers had reported that Prime Minister Boris Johnson was unlikely to receive a fine, despite attending at least two of the banned events. As such, he’s likely to avoid getting a criminal record.
5. Oil prices edge up as OPEC stands firm
Ministers from OPEC countries again refused to budge from their long-standing position of gradual increases in output to bring down crude prices that are still well above $100 a barrel.
OPEC and allies, including Russia, are due to meet later this week and are expected to stick with their plan for an increase of 400,000 barrels a day from May. However, they seem even less likely to achieve that than usual, given supply problems in both Russia and Kazakhstan. The Caspian Pipeline Consortium, which ships Kazakh oil to world markets via the Black Sea, will be shipping at reduced rates for at least the next three to four weeks due to storm damage to its export terminal.
By 6:30 AM ET, U.S. crude prices were up 1.4% at $107.39 a barrel, while Brent futures were up 1.4% at $110.98.
The API reports its weekly inventory data at 4:30 PM ET as usual.