By Peter Nurse
Investing.com - U.S. stocks are seen opening lower Friday on fears that Russia is set to invade Ukraine, potentially resulting in severe sanctions which could disrupt the global recovery from the pandemic.
At 7 AM ET (1200 GMT), the Dow Futures contract was down 230 points, or 0.7%, S&P 500 Futures traded 33 points, or 0.8%, lower and Nasdaq 100 Futures dropped 140 points, or 1%.
White House National Security Adviser Jake Sullivan said in an interview with CNN on Sunday that a Russian invasion of Ukraine could begin any day. The U.S. and several other western countries have advised their nationals to leave Ukraine.
The Finance Ministers of the G7 group of large economies followed up on Monday by warning Russia of "massive" economic consequences if it chose to invade Ukraine.
"Any further military aggression by Russia against Ukraine will be met with a swift, coordinated and forceful response," the G7 Finance Ministers wrote in a joint statement. "We are prepared to collectively impose economic and financial sanctions which will have massive and immediate consequences on the Russian economy."
This would likely mean sanctions on Russia’s financial system, making it difficult for western companies to pay for the country’s crude exports and forcing them to chase supplies elsewhere, likely pushing energy prices higher.
The main averages on Wall Street closed sharply lower on Friday, with investors already concerned by a red-hot inflation report, deteriorating consumer sentiment and fears of aggressive Federal Reserve monetary policy tightening.
The blue-chip Dow Jones Industrial Average closed over 500 points, or 1.4%, lower on Friday, dropping 1% over the week. The broad-based S&P 500 dropped 1.9% during the final session of the week and the Nasdaq Composite fell 2.8%, resulting in weekly losses of 1.8% and more than 2%, respectively.
The week’s main economic focus will be Wednesday’s minutes from the Fed's January meeting, as investors look for any indications on whether the central bank is likely to hike rates by half a percentage point at its upcoming March meeting.
Turning to the corporate sector, Lockheed Martin (NYSE:LMT) will be in focus after the aerospace company scrapped plans to buy Aerojet Rocketdyne (NYSE:AJRD), bowing to pressure from antitrust regulators who had sued to prevent the $4.4 billion deal.
Oil prices edged lower, giving back earlier gains having climbed to the highest levels in more than seven years.
Russia is one of the world’s top crude producers, and any sanctions on its output would disrupt the global supply just as the Organization of the Petroleum Exporting Countries and its allies, including Russia, struggles to ramp up output to cope with recovering demand.
By 7 AM ET, U.S. crude futures traded 0.2% lower at $92.92 a barrel, falling back after hitting its highest since September 2014, while the Brent contract fell 0.3% to $94.18, after earlier hitting its highest since October 2014.
Additionally, gold futures rose 0.9% to $1,857.75/oz, while EUR/USD traded 0.3% lower at 1.1310.