By Geoffrey Smith
Investing.com -- A Russian attack kills scores of fleeing civilians at a Ukrainian rail station. Russia's central bank cuts interest rates sharply to stave off a looming economic and financial sector crisis. Stocks are set to open higher, even though bond yields continue to advance, Marine Le Pen senses victory in France's presidential elections, and world food prices are rising at their fastest pace ever. Here's what you need to know in world financial markets on Friday, 8th April.
1. Russia attacks fleeing civilians
Russian rocket artillery hit a train station in eastern Ukraine, killing over 30 people and injuring over 100 more, is one of the most shocking incidents yet in the six-week-long war.
The victims had gathered at Kramatorsk station as part of a mass evacuation of civilians ahead of an expected major Russian attack on eastern Ukraine. Russia’s Defense Ministry first said it had used high-precision missiles against three stations in the region, then accused Ukraine of staging the incident.
The attack comes as the EU confirmed its latest sanctions package, which bans imports of Russian coal. Japan also banned Russian coal imports on Friday. However, the attack is certain to raise the pressure on European governments, especially Germany, to apply the same treatment to Russian oil.
2. Russia cuts rates to stave off financial crisis
Russia’s central bank surprisingly cut its key interest rate by 3 percentage points to 17%, saying that the balance of risks in the economy had shifted away from inflation to economic recession and financial instability.
The move reflects a degree of success in cushioning the immediate impact of western sanctions on the Russian economy, but analysts still expect gross domestic product to contract by around 10% this year. Many businesses, including much of the country’s manufacturing sector, have already had to idle capacity as sanctions have hit the import of vital components. Russia releases fourth quarter GDP numbers for 2021 along with March CPI data at 12 PM ET (1600 GMT)
Official exchange rates for ruble had recovered to their prewar level ahead of the move, although economists have played down the importance of that because the central bank has imposed capital controls that don’t allow the currency to be freely bought and sold, while withdrawals from dollar accounts held locally by businesses and individuals are still subject to strict limits.
3. Stocks set to open higher, shrugging off rising yields
U.S. stock markets are set to open higher later, building on Thursday’s tentative recovery at the end of a week in which expectations for future U.S. interest rates have been aggressively repriced.
By 6:20 AM ET (1020 GMT), Dow Jones Futures were up 74 points, or 0.2%, while S&P 500 Futures were also up 0.2% and Nasdaq 100 Futures were up 0.1%. The three main cash indices had gained by between 0.1% and 0.5% on Thursday.
That’s despite further advances in bond yields which, in signaling higher capital costs for the broader economy, ought to weigh on stocks. The benchmark 10-Year Treasury yield rose another 2 basis points to 2.69%, the latest in a string of three-year highs hit this week.
Stocks likely to be in focus later include Tesla (NASDAQ:TSLA), whose factory in Austin, Tx., was opened with great fanfare by CEO Elon Musk on Thursday, and Robinhood (NASDAQ:HOOD), after Goldman Sachs, the lead underwriter when the online brokerage went public, downgraded the stock to a 'sell'. It’s already lost nearly two-thirds of its value since listing.
4. French election jitters as Le Pen closes gap on Macron
France heads to the polls at the weekend for the first round of presidential and parliamentary elections.
The opinion poll lead of incumbent President Emmanuel Macron over the right-wing populist Marine Le Pen has shriveled from some 30 percentage points at the outbreak of Russia’s war in Ukraine to an average of only 3.5% according to most recent polls. One published on Thursday even suggested that Le Pen would beat Macron in the run-off in two weeks’ time (assuming they both progress).
French bonds and stock have underperformed the rest of Europe sharply this week as the chances of a Le Pen victory have risen. Her platform revolves largely around tackling the cost-of-living crisis through greater state intervention.
5. Global food prices on a tear; WASDE report eyed
Global food prices are rising at their fastest pace since records began, according to the UN.
The Food and Agricultural Organization’s world food price index rose 12.6% in March, according to data released on Friday, bringing its annual rise to 34% - the third straight record high. The FAO described the move as a “giant leap.”
The increase is due largely – but by no means exclusively – to the disruption of wheat and other grain-related products from the Black Sea since Russia invaded Ukraine. Further increases are likely due to the massive shock to fertilizer prices from the sharp rally in natural gas over the last year.
The U.S. government releases its latest forecasts for world supply and demand for grains and other selected agricultural commodities at 12 PM ET.