By Geoffrey Smith
Investing.com -- The U.S. and Russia will meet for talks over Ukraine again next week, but not before Russia has staged some nuclear and missile exercises later this weekend. Stocks are set for a weak bounce from Thursday's sell-off, with eyes on Deere (NYSE:DE) earnings and DuPont (NYSE:DD)'s latest exercise in corporate restructuring. The ECB's hawks continue to find their voice, and U.K. retail sales also point toward another rate hike soon. Crude oil prices slip, meanwhile, on reports of progress in talks to lift sanctions on Iran. Here's what you need to know in financial markets on Friday, 18th February.
1. Russian saber-rattling gets louder
Russia will hold exercises to test the readiness of its nuclear and ballistic missiles on Saturday, in the latest extravagant show of military strength.
The drills, which the Kremlin says are long-planned, will involve its armed forces in the Southern Military District (opposite Ukraine) and its Black Sea Fleet. They come at a time when the U.S. is still warning that a Russian invasion of neighboring Ukraine may be imminent. Russia says it has no plans to invade but, in a document published by the Foreign Ministry on Thursday, again warned of possible military action if NATO does not grant its demand that Ukraine never be allowed to join the alliance.
U.S. Secretary of State Anthony Blinken is to meet his Russian counterpart Sergey Lavrov one more time for talks to resolve the crisis next Thursday, the State Department said late on Thursday.
2. Celanese in $11 billion deal for DuPont Assets
Celanese (NYSE:CE) is set to buy DuPont’s mobility and materials unit for $11 billion, the latest reshuffling of DuPont’s portfolio as it focuses on electronics, automotive and water.
DuPont has already spun off its nutrition and biosciences unit and agreed to sell other businesses including. It’s also been an active buyer, agreeing to buy Laird Performance Materials for $2.3 billion and engineering materials maker Rogers (NYSE:ROG) for $5.2 billion.
The deal is expected to close around the end of 2022.
3. Stocks set to open higher on hopes for last-ditch resolution
U.S. stock markets are set to open modestly higher later, rebounding from Thursday’s losses that were triggered by fresh fears of war in eastern Europe, as well as some worryingly weak guidance from companies making their quarterly reports.
By 6:15 AM ET, Dow Jones futures were up 104 points, or 0.3%, while S&P 500 futures were up 0.4% and Nasdaq 100 futures were up 0.7%/. In all three cases, that’s not even a quarter of what was lost on Thursday.
Earnings season has more or less run its course now but has been distinguished by the regular and violent reactions to companies who have either missed consensus forecasts or warned of slowing growth in the months ahead. The trend has hit not just ‘profitless tech’ but also market darlings such as Meta Platforms (NASDAQ:FB) and, on Thursday, chipmaker Nvidia (NASDAQ:NVDA).
Deere, Cerner (NASDAQ:CERN) and Campbell Soup (NYSE:CPB) report earnings later.
4. Europe’s rate path edges higher
The trajectory for interest rates in Europe nudged higher overnight, with another European Central Bank policy maker – Slovakia’s Peter Kazimir - coming out in favor of ending the bank’s asset purchases in August to give itself ‘flexibility’ for interest rate hikes thereafter.
As of today, the ECB is still – just about – holding to the notion that it won’t have to raise interest rates this year. However, an increasing number of policymakers are now questioning that. The influential German board member Isabel Schnabel earlier this week issued a strongly worded warning about the inflationary impact on house prices from the ECB’s current stance.
Elsewhere in Europe, U.K. retail sales bounced back strongly in January, keeping the U.K. on course for a third successive rate hike at the Bank of England’s next policy meeting in March.
5. Crude slips further on Iran optimism; U.S. rig count due
Crude oil prices slid on reports that Iran and the West are closer to a deal that would lift sanctions on the Islamic Republic in return for it abandoning further progress on its nuclear program.
Analysts say a deal would pave the way for the return of as much as 1 million barrels of oil a day to world markets, although its hard to predict the net effect as there is no reliable information readily available on the ability of Iran’s oil industry to ramp up production, and much of its current output is already leaking out into world markets - notably to China - via unofficial channels.
By 6:30 AM ET, U.S. crude futures were down 2.3% at $89.72 a barrel, while Brent crude futures were down 2.1% at $91.06 a barrel. The Baker Hughes rig count and the CFTC’s weekly positioning data follow later Friday.