As Oil Goes Up, Stocks Go Down
The world’s turn from Russian oil
The I.M.F. said over the weekend that the war in Ukraine and sanctions against Russia would have a “severe impact” on the global economy, further disrupting supply chains and stoking already high inflation. Investors have been processing the latest developments, and markets opened on Monday with sharp moves: Most notably, energy prices are soaring and stocks are sinking.
Brent crude oil, the international benchmark, briefly rose above $130 a barrel, roughly double the price a year ago. The price of European natural gas continued to soar, and is triple its level a month ago. Stocks fell in Asia and in Europe many markets have slipped into bear-market territory, down 20 percent from recent highs. Stocks in the U.S. are poised to open lower in what’s shaping up to be another tumultuous session.
Energy prices are reacting to talk of an embargo on Russian oil. Western lawmakers have begun discussing a ban, long seen as unlikely. (The Treasury Department stressed that Wall Street could still trade Russian oil and gas, after some financial firms stopped.)
Shell shows how difficult a total ban would be to enforce. The oil giant confirmed that it bought some Russian crude to maintain fuel supplies to Europe, even as it said it would get out of its Russia operations. “We will further reduce our use of Russian oil as alternative crudes become available to buy,” a company spokesman told Reuters, but “in the current, tight market there is a relative lack of alternatives.”
Analysts are rethinking their stock-market forecasts. One theme that’s taking shape, strategists at Goldman Sachs note in a report, is a shift toward “pricing more risk premium in European assets.” Equity and currency markets in Europe have already blown past the bank’s pre-invasion downside scenario, while U.S. assets have only priced in about half of the forecast worst-case decline. (Relatedly, Goldman recently upped its expectations for buybacks and dividends at S&P 500 firms.) Holger Schmieding of Berenberg expects stocks to recover some of their losses in three to six months, but “for a while, markets can take on a self-sustaining dynamic of their own. Fear can beget fear.”
The latest on the Russia-Ukraine war:
HERE’S WHAT’S HAPPENING
China signals full steam ahead for its economy. Beijing officials over the weekend announced their economic priorities for the year, including a growth target of 5.5 percent, job creation and increased welfare spending.
The pandemic’s global death toll nears 6 million. Researchers at Johns Hopkins University predicted that the world would surpass that total today.
A trucker convoy targets Washington. Hundreds of vehicles, inspired by antigovernment protests in Canada, encircled the District of Columbia yesterday, driving slowly to snarl traffic and protest Covid restrictions. It appeared to have petered out by the afternoon, but organizers said they plan to hit the road again today.
Robert Smith may have played a bigger role in a tax avoidance scheme than previously thought. Court documents show that the billionaire financier was involved in planning a 2004 deal that let a key investor, Robert Brockman, avoid U.S. taxes, The Wall Street Journal reports. Smith reached a nonprosecution agreement with federal authorities in 2020.
“The Batman” cleans up at the box office. The latest superhero movie took nearly $129 million in the U.S. and Canada on its opening weekend, vastly exceeding expectations.
The brands still doing business in Russia
This weekend saw a steady stream of companies pausing or ending their operations in Russia. American Express, Mastercard and Visa said they would suspend operations in the country; Netflix stopped streaming there and TikTok halted uploads; KPMG and PWC pulled out, joining several consultancies and law firms. (Yale’s business school is keeping a list of what companies are doing.)
A number of prominent consumer brands are keeping quiet, including Coca-Cola, Mars, McDonald’s, PepsiCo and Procter & Gamble. (None responded to a request for comment.) Many consumer companies have spent heavily to build their brands in Russia, and have extensive infrastructure to consider.
PepsiCo, which started selling in the Soviet Union in the early 1970s, acquired a Russian juice and dairy company in a $5.4 billion deal a decade ago.
Coca-Cola, which entered the Soviet Union after the fall of the Berlin Wall, has spent heavily to catch up with Pepsi. Coke has “a long history of wanting to be in every country in the world,” said Mark Pendergrast, author of “For God, Country and Coca-Cola.”
Mars started business in Russia in 1991 and has invested more than $2 billion in the market, according to the Roscongress Foundation.
Should they stay or should they go? Some question whether companies should have to take a stand on Russia, given strife elsewhere in the world. There are also concerns that if brands act in Russia, they might be asked to do the same in China, where their businesses are bigger.
Quitting Russia hurts ordinary Russians. McDonald’s has about 850 Russian outlets, with thousands of employees. Danone said yesterday that it would suspend “all investment projects” in Russia, but still sell dairy products and infant formula to meet “essential food needs.” But some experts say that for sanctions to work, they have to hurt, including in the countries imposing the punishments.
More on corporate action over Russia:
“It’s like the banks have colluded with the sleazebags on the street to be able to steal.”
— Bruce Barth, who had money stolen from his digital wallet via the payment app Zelle. Despite growing fraud on the money transfer service, which was created by the nation’s largest banks, many customers have not been refunded.
Pregnancy in the Zoom era
Expectant fathers can control when they tell the office their news. They might choose to mention they are expecting a child to close colleagues, but not at a meeting with clients. Pregnant women eventually don’t have a choice: Their changing bodies do the telling — unless they work remotely.
Pregnant women in the Zoom era have been able to work without broadcasting their pregnancies, and many of them are enjoying it, DealBook’s Sarah Kessler reports. It’s not just about avoiding awkward comments (“Were you trying?”). Many also say having their bellies cropped out of video chats allayed their fears of being treated differently by colleagues.
The Russia-Ukraine War and the Global Economy
Stereotypes about working mothers also affect pregnant women. Both groups tend to be seen as less competent, more needing of accommodation and less committed to work, said Eden King, a professor of psychology at Rice University. In a 2020 study, King and her colleagues asked more than 100 pregnant women to track how much their supervisors, without having been asked for help, did things like assign them less work. Women who received more unwanted help reported feeling less capable, and they were more likely to quit.
The virtual office doesn’t solve these problems, but it may help. “Some women do need help, and some women do want accommodations,” King said. But “you have to ask women what they want and what they need and not assume that we know.”
Russia tests Wall Street’s definition of ‘social responsibility’
Investments linked to environmental, social and governance issues are expected to reach as much as $41 trillion by the end of this year, according to Bloomberg Intelligence. But the war in Ukraine is highlighting how the E.S.G. label has been stretched.
Are military stocks socially responsible? Charles Armitage, Citigroup’s European defense industry analyst, recently said that given Russia’s attack on Ukraine, the E.S.G. label should be extended to arms manufacturers, which have traditionally been excluded. “Defending the values of liberal democracies and creating a deterrent, which preserves peace and global stability” makes this warranted, he said. Several E.S.G. experts dismissed the proposal, but it captures a thorny debate.
Blackrock’s iShares ESG Aware MSCI USA, the world’s largest “socially responsible” exchange-traded fund, held $127 million worth of shares at the end of last year in the military contractor Raytheon, a major supplier of arms to Saudi Arabia, which used them to bomb civilians in Yemen.
The S.E.C. is looking into E.S.G. fund regulations. Last week, its chair, Gary Gensler, said that the industry could use simpler labels, akin to those on milk cartons. Funds should be more specific about what social issues drive investment decisions, Rachel Robasciotti, the manager of the Adasina Social Justice All Cap Global exchange-traded fund, told DealBook: “There are absolutely some funds that are just putting on the veneer of social responsibility.”
THE SPEED READ
Warren Buffett’s Berkshire Hathaway announced a $5 billion stake in Occidental Petroleum, from which Carl Icahn sold out. (CNBC, WSJ)
The owners of the Chicago Cubs M.L.B. team may reportedly join the bidding for Chelsea F.C., the English soccer team owned by the Russian billionaire Roman Abramovich. (Bloomberg)
Ryan Cohen, the billionaire co-founder of Chewy and director at GameStop, has taken a nearly 10 percent stake in Bed Bath & Beyond and is pushing to shake up the retailer’s strategy. (WSJ)
Investors in Amazon plan to demand that the e-commerce giant provide more detail about its tax bills. (FT)
Disney is facing criticism for not speaking out against a Florida state bill that would limit what schools teach about sexual orientation. (Wrap)
Democrats and Republicans are drawing different lessons from processing delays at the I.R.S. (NYT)
Best of the rest
Activision Blizzard’s C.E.O., Bobby Kotick, is stepping down from Coca-Cola’s board amid criticism over how he dealt with accusations of workplace harassment and abuse at Activision. (CNBC)
Apple shareholders approved proposals recommending an audit of the company’s civil-rights impact, which the company opposed. (Bloomberg)
Ken Griffin of Citadel admitted that he may have been wrong to dismiss crypto. (Insider)
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