Finance

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, March 11, 2022.
Brendan McDermid | Reuters

Stock futures rose in overnight trading Sunday ahead of an important week as the Russia-Ukraine war continues to escalate and the Federal Reserve could hike rates for the first time since 2018.
Futures on the Dow Jones Industrial Average gained 150 points. S&P 500 futures climbed 0.5% and Nasdaq 100 futures traded 0.6% higher.

Fighting has intensified around Ukraine’s capital, Kyiv, while Russian forces bombard cities across the country, killing civilians who are unable to escape. The financial fallout of stiff Russian sanctions will come into sharper focus in the coming days ahead of a scheduled sovereign bond payment.
Meanwhile, the Fed is expected to raise its target fed funds rate by a quarter percentage point from zero at the end of its two-day meeting Wednesday. Investors are also looking to the central bank for its new forecasts for rates, inflation and the economy, given the uncertainty from the escalated geopolitical tensions.
“At the moment, the Fed is expected to be cautious when it comes to interest rate policy in 2022, given the conflict in Ukraine,” Lindsey Bell, chief markets and money strategist at Ally. “The conflict is adding complexity to the Fed’s already difficult job. The central bank will likely remain data-dependent as it makes rate decisions throughout the year.”

Stock picks and investing trends from CNBC Pro:

The Dow fell 2% last week, suffering its fifth negative week in a row. The S&P 500 and the Nasdaq Composite dropped 2.9% and 3.5% last week, respectively, both posting their biggest weekly loss since Jan. 21.
Major averages have all dipped into correction territory as geopolitical risks and inflation fears sent asset prices falling. The blue-chip Dow is down nearly 11% from its record high, while the S&P 500 has fallen almost 13% from its all-time high. The tech-heavy Nasdaq has borne the brunt of the sell-off, falling more than 20% from its record high in November.
“The near-term risk/reward is positive if for no other reason than the tape just had about every bit of negative news thrown at it and still couldn’t sustain a material break below the 4200 level,” said Adam Crisafulli, founder of Vital Knowledge.

WATCH LIVEWATCH IN THE APP More

LAST SUMMER, amid mounting alarm about inflation in America, economic advisers in the White House penned a blog post in which they examined historical parallels for the building price pressures. Although the press was full of comparisons with oil shocks in the 1970s, they wrote that a nearer relative was the dislocation after the second world war, when supply shortages interacted with pent-up demand to drive up inflation. It was a well-reasoned argument. But the surge in oil prices over the past month, in the wake of Russia’s invasion of Ukraine, gives rise to an unsettling question: is the global economy now seeing a 1970s-style oil shock on top of a late 1940s-style supply crunch?To be sure, no serious economist expects inflation in the rich world to reach the giddy double-digit heights of those episodes. Nevertheless, the oil shock is a painful development. According to figures released on March 10th, consumer-price inflation in America already stood at a 40-year high in February, at 7.9% year on year; the rate in the euro area exceeded 5% (see chart 1). Prices had been expected to come off the boil as the rich world put the worst of the covid-19 pandemic behind it. Now the new consensus is that inflation will remain uncomfortably high in America, Europe and elsewhere over the coming months. And as if any more bad news were needed, rolling lockdowns in parts of China, including the tech hub of Shenzhen, could add to supply-chain strains.The most striking evidence of the upward shift in inflation expectations can be found in fixed-income markets in America. ICE, a financial firm, distils a few different numbers, including yields on inflation-protected bonds and interest-rate swaps, into short-term and long-term indices for gauging expectations. In late January the expected rate of inflation over the next year was 3.5%. By March 11th, it had soared to 5.6%, far and away the highest since the pandemic began (see chart 2).At the same time, longer-term indices have been a little calmer. A gauge of expected average consumer-price index (CPI) inflation over the course of five years, starting five years down the road, is 2.6%. That is about half a percentage point higher than a year ago, but not terribly far off the Federal Reserve’s goal of keeping inflation to an average of 2% (as judged by another measure that is typically somewhat beneath the CPI gauge). Europe has seen similar, if slightly steeper, trends. The one-year inflation swap rate rose to 5.9% on March 8th.Markets are inherently volatile, so deriving inflation predictions from bond yields should be taken with a pinch of salt. But the shift in prices is broadly in line with what economists are forecasting. Last week Bank of America raised its inflation forecasts for much of the world. In America it now expects inflation over 2022 as a whole to average 7%, up from its prior forecast of 6.3%. In the euro zone it sees an even bigger increase, with inflation averaging 6% this year, well above its previous forecast of 4.4%. The challenge is greater for Europe because of its high dependency on Russian gas, which supplies about 45% of its gas imports.In an indication of just how pervasive the pressures are likely to be, economists are even ratcheting up their inflation forecasts for Japan, where deflation has long been the bigger threat. On March 8th S&P, a rating agency, said that Japanese inflation would average 2% this year, more than double its previous prediction. So far forecasters expect a relatively modest increase in overall inflation in emerging markets. But rising food costs will be especially damaging for their poorest citizens.Two related questions emerge from these forecasts. The first is whether the rise in oil prices today will feed through into lofty inflation in the longer run. That will be a risk if more people take high inflation as a fait accompli and demand big pay bumps as a result. Yet there is reason for cautious optimism on this front. A large body of research shows that the pass-through from higher oil prices into non-energy inflation is quite limited. For instance, Goldman Sachs, a bank, calculates that a 10% increase in crude-oil prices leads to a jump of nearly three-tenths of a percentage point in headline inflation in America, but to an increase of just about three-hundredths of a percentage point in core inflation (stripping out food and energy prices). That helps to explain why market pricing for longer-term inflation remains relatively subdued.The follow-up is what central bankers choose to do about fast-rising prices. Whereas the pandemic was terra incognita for them, oil shocks are at least more familiar. The received wisdom of the past few decades is that, if anything, fiscal and monetary support may be needed, because rising energy prices act as a drag on consumption. That is particularly true for Europe, where the hit to growth is likely to be the largest. But on March 10th the European Central Bank surprised markets by announcing that it would wind down its bond-buying more quickly.In America, where the economic downsides from the Ukraine war are milder and inflation has been stubbornly high for months, the Fed is unlikely to be deterred from raising rates. It is widely expected to kick off a tightening cycle at a meeting of its rate-setting committee that wraps up on Wednesday. But Jerome Powell, the Fed’s chairman, is also sure to devote much time to talking about geopolitical risks. It was hard enough for central bankers to get a good read on the economy last year, given the pandemic and supply-chain snarls. Now they also have to think through the consequences of war. For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

TO THEIR champions, cryptocurrencies are supposed to be a libertarian utopia. Because tokens are created and moved by loose, decentralised networks of individual computers based in dozens of countries, they are in theory free from control by intermediaries, such as banks, which can be regulated by governments. Critics of crypto-finance have long looked askance at the same system. To statists, it represents the tyranny of techno-anarchy. Russia’s invasion of Ukraine and the West’s subsequent sanctions on Russian banks, companies and elites have intensified this debate. Warnings from politicians and regulators in America and Europe suggest fears are high that people and entities hit with sanctions, and those wanting to keep doing business with them, will use cryptocurrencies and the exchanges on which they are traded to dodge the restrictions. Were they able to move money around without governments snooping, it would partly disable the West’s main weapon against Vladimir Putin. Those attempting to evade any sanctions imposed on them will typically be trying to preserve their wealth. This requires holding assets that cannot be clearly linked to a person or institution, as opposed to those—such as property, yachts or cash in foreign bank accounts and securities—which can be (at least with a bit of detective work). One appeal of crypto’s decentralised network is that it functions on a supranational basis, at least in theory. Another is that it is believed by many to offer stronger privacy protection than the traditional financial system. Public blockchains, like bitcoin and ethereum, announce their transaction information to the world, but keep the participants anonymous. In the banking system privacy is ensured by keeping transaction information private but the people involved are identifiable. In reality, the lines between these two are fuzzier than would-be sanctions-busters might hope.Certainly, there is evidence that Russian people have been buying more crypto. Trading volumes in the rouble-bitcoin currency pair on Binance, the biggest crypto-exchange by volume, have climbed to about ten times their normal level, from around 50 bitcoins-worth ($20m) per day to 500. But this may stem primarily from a desire to hold an asset which is not plunging in value. Bitcoin is worth roughly what it was in dollars on February 24th, whereas the rouble has tumbled by around 40% against the greenback.For an oligarch looking to dodge American sanctions, converting wealth into crypto would ideally be a means, not an end. It is not possible to buy most everyday items or financial assets directly with cryptocurrencies. “Ultimately what they really need to do is get access to some form of fiat currency, which becomes more challenging,” said Christopher Wray, the director of the FBI, in a United States Senate hearing on the Russian invasion on March 10th.To convert back into fiat currency requires interacting with an exchange, which would act as the interface between traditional banks which operate in sovereign money, like the dollar, and crypto. As crypto-exchanges have grown bigger and more important, many have become regulated. Some of the biggest are publicly listed. Most have a presence in America and Europe. This poses two problems for would-be sanctions-dodgers.First, crypto-exchanges know their customers’ identities. Early iterations of some exchanges resisted the need to implement “know your customer” (KYC) anti-money-laundering measures, but as governments have begun to take crypto more seriously they have put pressure on the industry to tighten its procedures. Binance implemented a KYC policy in 2021, requiring those using it to identify themselves to the firm (Binance has said that 3% of its customers left as a result).Second, governments have begun to go further than merely arm-twisting exchanges to implement existing anti-laundering guidelines—a crackdown that the Russian invasion has only accelerated. The crypto-industry had long been awaiting an executive order from President Joe Biden which would lay out some regulatory principles. This arrived unexpectedly on March 9th. It empowers regulators to, among other goals, minimise illicit use of crypto. Just two days later the White House issued a joint statement with the leaders of other G7 countries and the European Union, stating a commitment to “taking measures to better detect and interdict any illicit activity” using crypto-assets, and vowing to “impose costs on illicit Russian actors using digital assets to enhance and transfer their wealth, consistent with our national processes”. The United States Treasury has made a point of stressing that its sanctions apply “regardless of whether a transaction is denominated in traditional fiat currency or virtual currency”. Both Binance and Coinbase, another large crypto-exchange, have said they will freeze the assets of any individuals who have been targeted with sanctions (though both have resisted pulling out of Russia altogether). For such individuals, converting wealth to crypto comes with a serious downside, too. Although public blockchains are still widely seen as impervious to prying eyes, they are far from it. The transparency of the data on the ledger of transactions offers lots of clues that could help a determined investigator who is hoping to sniff out sanctions-dodgers. Government sleuths have invested significant time and energy in trying to link supposedly anonymous wallets with real people, with some success. In December, for instance, the FBI managed to seize $3.6bn-worth of crypto-assets related to a theft from an exchange in 2016. “There have been very significant seizures and other efforts that I think have exposed the vulnerability of cryptocurrency as a way to get around sanctions,” said Mr Wray. “The Russians’ ability to circumvent the sanctions with cryptocurrency is probably highly overestimated.” Crypto may turn out to be far more useful to those looking to move in the open, rather than in the shadows. On February 26th the official Ukrainian Twitter account published digital-wallet addresses through which it is accepting bitcoin, ethereum and other tokens. Nearly $100m-worth of tokens has since been donated. Much of this is being spent on things like bulletproof vests and night-vision goggles, according to Alex Bornyakov, Ukraine’s deputy minister for digital transformation. In extreme events, where it is helpful to shrink the time that elapses between someone deciding to make a donation and that money being put to work, crypto has an obvious advantage. Tokens can be sent to another wallet in seconds, whereas international bank transfers can take days.All this makes for an interesting transition for crypto. The conflict in Ukraine has brought into focus the financial-crime risks it poses, but also the advantages of speed and ease of transfer it offers over fiat currency—which could help during or after other types of extreme, time-sensitive events too, such as natural disasters. The war makes it clear that there are serious uses for crypto, but that it can expect to be policed more seriously, too. Our recent coverage of the Ukraine crisis can be found here More

A sign of Meta, the new name for the company formerly known as Facebook, is seen at its headquarters in Menlo Park, California, October 28, 2021.
Carlos Barria | Reuters

Check out the companies making headlines in midday trading Friday.
Meta Platforms — Shares of the Facebook parent fell 3.8% after Russia restricted access to Instagram and opened a criminal investigation on Meta, after the company changed its hate speech rules to allow violent threats against Russia and its military for its invasion of Ukraine. Additionally, regulators in the EU and U.K. opened antitrust probes into Meta over its 2018 “Jedi Blue” ad deal.

Rivian Automotive — Rivian’s stock price tumbled 7.5%, after the electric vehicle maker reported an earnings miss for its fourth quarter and forecast modest vehicle production for 2022. Rivian is projecting only 25,000 car deliveries in fiscal year 2022.
DocuSign — Shares of the electronic signature company plummeted 20.1% after DocuSign issued disappointing revenue guidance for the full year. The company expected 2022 revenue to range between $2.47 billion and $2.48 billion, well below a StreetAccount forecast of $2.61 billion.
Blink Charging — The EV charging company lost 7.7% after reporting a wider-than-expected loss for the quarter. Still, Blink said that momentum continues to be strong as the business community and government agencies promote the benefits of strong EV infrastructure.
Oracle — Shares of Oracle rose 1.5% after the software company released its latest quarterly results. Oracle’s revenue of $10.51 billion matched a Refinitiv consensus estimate. The company earned an adjusted $1.13 per share, but it was unclear if that was comparable to a forecast of $1.18 per share.
Pearson — Shares of the education publisher jumped 17.7% after the company rejected an $8.5 billion offer from Apollo Global Management. The private equity affirm made two unsolicited approaches, Pearson said, with proposals that undervalued the company.

Deere — Shares of the machinery stock added 3% after Wells Fargo issued a price target of $455 on the stock, implying about 20% upside. The firm said Deere is setting itself apart from its competitors by embracing advances in technology.
DiDi Global — The ride-hailing company saw its shares fall 44% following a Bloomberg report that it’s suspending plans to list its shares in Hong Kong. Didi failed to meet Chinese regulators’ demands related to how it handles sensitive user data, according to the report.
Zumiez — The apparel maker’s shares dropped 6.9% after the company reported quarterly results that fell short of analysts’ expectations. Zumiez also issued guidance for the current quarter that also missed estimates.
 — CNBC’s Samantha Subin and Sarah Min contributed reporting

WATCH LIVEWATCH IN THE APP More

Check out the companies making headlines before the bell:
Oracle (ORCL) – The business software giant’s shares fell 2.3% in the premarket after its adjusted quarterly profit of $1.13 per share fell 5 cents shy of estimates. Revenue was in line with forecasts. Oracle continues to see progress in shifting its customers to the cloud, with cloud revenue jumping 24% compared with a year ago.

Uber Technologies (UBER) – The ride-hailing company’s shares rose 1.6% in premarket action after Deutsche Bank initiated coverage with a “buy” rating and a $50 price target. Deutsche Bank points to Uber’s leading position in a fast-growing market as well as an attractive entry point for the stock.
Pearson (PSO) – The education publisher’s stock spiked 20.1% in premarket trading after private equity firm Apollo said it was in the preliminary stages of evaluating a possible cash offer for Pearson. Apollo said there was no certainty an actual offer would be made.
Rivian (RIVN) – Rivian shares fell 8.5% in premarket action after the electric vehicle maker reported a wider than expected loss, and said supply chain issues would limit its factory output this year.
DiDi Global (DIDI) – DiDi shares plunged 12.7% in the premarket following a Bloomberg report that the ride-hailing company was suspending plans to list its shares in Hong Kong. People familiar with the matter said Didi failed to meet demands by China regulators that it overhaul its handling of sensitive user data.
Toyota Motor (TM) – Toyota slipped 1.7% in the premarket after saying it would cut production by up to 20% in April, May and June as it seeks to ease the strain on its suppliers, who are struggling to provide computer chips and other parts.

DocuSign (DOCU) – The electronic signature company reported adjusted quarterly earnings of 48 cents per share, 1 cent above estimates, with revenue also coming in above Street forecasts. However, the shares tumbled 17.5% in the premarket after DocuSign issued weaker-than-expected guidance for the full year.
Ulta Beauty (ULTA) – The cosmetics retailer’s stock rose 2.6% in the premarket after reporting better-than-expected profit and revenue for its latest quarter. Comparable-store sales also beat forecasts with a 21.4% increase, and Ulta announced a new $2 billion share buyback.
Blink Charging (BLNK) – The maker of EV charging equipment reported a wider-than-expected quarterly loss even as sales beat analyst estimates. The company said it continues to see strong momentum as the business community and government agencies continue to promote the benefits of a reliable EV infrastructure. Blink’s shares slid 6.1% in premarket trading.
Zumiez (ZUMZ) – The streetwear and action sports apparel maker saw its shares plummet 14.1% in premarket action after its quarterly earnings and revenue fell short of Wall Street forecasts. Current quarter guidance was also shy of estimates.

WATCH LIVEWATCH IN THE APP More

Hong Kong shares of dual-listed Chinese companies including Nio, JD.com and Alibaba plunged in Friday trade after fears of U.S.-delisting resurfaced.
Those losses tracked declines for some U.S.-listed Chinese stocks overnight amid renewed concerns over potential delistings stateside.
Still, UBS Global Wealth Management’s Hartmut Issel remains positive on the affected Chinese stocks, though he admits it’s “not for the faint hearted.”

The Chinese and Hong Kong flags flutter as screens display the Hang Seng Index outside the Exchange Square complex, which houses the Hong Kong Stock Exchange, on January 21, 2021 in Hong Kong, China.
Zhang Wei | China News Service via Getty Images

Hong Kong shares of dual-listed Chinese companies including Nio, JD.com and Alibaba plunged in Friday trade after fears of U.S.-delisting resurfaced.
By Friday afternoon in the city, shares of tech behemoth Alibaba fell 6.56%. EV maker Nio, which debuted in Hong Kong a day earlier, saw its shares plunge 11.64%. Baidu declined 5.14% while NetEase slipped 6.94%.

JD.com plummeted 15.67% after reporting a quarterly loss on Thursday.
The broader Hang Seng Tech index dropped 7.55%.
Those losses tracked declines for some U.S.-listed Chinese stocks overnight amid renewed concerns over potential delistings stateside.
The U.S. Securities and Exchange Commission recently named five U.S.-listed American depositary receipts of Chinese companies which they said failed to adhere to the Holding Foreign Companies Accountable Act. ADRs represent shares of non-U.S. firms and are traded on U.S. exchanges.
The China ADRs flagged by the SEC are the first to be identified as falling short of HFCAA standards. The act permits the SEC to ban companies from trading and even be delisted from U.S. exchanges if regulators stateside are unable to review company audits for three consecutive years.

Read more about China from CNBC Pro

Still, UBS Global Wealth Management’s Hartmut Issel remains positive on the affected Chinese stocks, though he admits it’s “not for the faint hearted.”
The fundamental value of these companies will not be affected, Issel, head of Asia-Pacific equities and credit at the firm, told CNBC’s “Street Signs Asia” on Friday: “Virtually all of them, the big ones anyway, these ADRs … their business is exclusively in China.”
“Virtually now all of them have also Hong Kong listing,” Issel added. “As an investor you just have to move over if there is an actual delisting [in the U.S.].”
Furthermore, he said: “We do know that the Chinese and also U.S. authorities are in contact, they could salvage it.”
— CNBC’s Bob Pisani contributed to this report.

WATCH LIVEWATCH IN THE APP More

ALTHOUGH BILLIONAIRES have been getting a bad rap for years, the sanctions levied at Russian oligarchs have intensified scrutiny on the origins of tycoons’ wealth. On March 1st President Joe Biden announced that his government was setting up a “klepto capture” task force to “go after the crimes of Russian oligarchs”.Listen to this story. Enjoy more audio and podcasts on More

Traders on the floor of the NYSE, March 2, 2022.
Source: NYSE

Stock futures were flat ahead of Friday’s session as the Dow Jones Industrial Average headed for its fifth losing week in a row amid Russia’s invasion of Ukraine.
Futures on the Dow Jones Industrial Average rose 50 points. S&P 500 futures rose 0.2% and Nasdaq 100 futures were little unchanged.

The Dow Jones Industrial Average dipped 112.18 points to 33,174.07 during regular trading on Thursday, after climbing more than 650 points in the previous session, while the S&P 500 shed 0.4%. The technology-heavy Nasdaq Composite dropped 1% to 13,129.96, led by losses from Apple and Meta Platforms.
Week to date, the Dow is down 1.31% and headed for its fifth negative week in a row since May 2019. Meanwhile, the S&P is down 1.60% and Nasdaq 1.38% this week.
The losses came as negotiations between Russia and Ukraine came to a halt without progress on a cease-fire or passage for civilians attempting to flee the city of Mariupol. The markets have fluctuated in recent weeks as investors weigh the fallout of the conflict between Russia and Ukraine.
Meanwhile, oil prices, which have been volatile amid the conflict, fell again on Thursday with West Texas Intermediate crude sliding to roughly $106 per barrel. Brent crude oil fell 1% to about $109 per barrel. Commodities including gold and silver which have rallied amid the war in Ukraine settled up 0.61% and 1.70% respectively.

Stock picks and investing trends from CNBC Pro:

“History from an investment point of view is on our side for the long-term,” Stephanie Link, Hightower’s chief investment strategist told CNBC’s “Closing Bell” on Thursday. “The market can recover, and I think eventually we will. We’ll have to see how long this goes but eventually, the market will recover.”

Thursday’s inflation report showed the consumer price index reach 7.9% in February, a fresh 40-year high. That was slightly higher than the expected 7.8% for the year, according to Dow Jones estimates. CPI gained month-over-month 0.8%, above estimates of 0.7% for the month.
Shares of Rivian slipped more than 11% in extended trading after missing estimates for the fourth quarter on the top and bottom lines, while DocuSign sank 18% after issuing weak guidance for the first quarter and fiscal year.

WATCH LIVEWATCH IN THE APP More