By Peter Nurse
Investing.com -- U.S. stocks are seen opening sharply lower Monday, as investors digest the potential economic ramifications of the increased sanctions on Russia at the start of a week that includes the release of the key monthly employment report.
At 7 AM ET (1200 GMT), the Dow Futures contract was down 430 points, or 1.3%, S&P 500 Futures traded 62 points, or 1.4%, lower and Nasdaq 100 Futures dropped 180 points, or 1.3%.
Global markets were roiled at the end of last week when Russian President Vladimir Putin authorized an invasion of Ukraine.
More volatility is likely Monday after the West announced plans to block some Russian banks from the SWIFT international payments network as punishment for the continued bombardment of Ukraine.
Although the move isn’t intended to impact energy flows from the world’s second largest crude oil producer, the measures are still designed to isolate Russia and thus are likely to disrupt global trade and hurt Western interests as well as those in Moscow.
"Exclusions from SWIFT will lead to missed payments and giant overdrafts similar to the missed payments and giant overdrafts that we saw in March 2020,” analysts at Credit Suisse said, in a note.
Adding to the geopolitical tensions, Putin placed his country’s nuclear deterrence forces on high alert as the West adopted a more aggressive stance to the invasion.
The EU stated it would start sending lethal weapons to Ukraine to help it defend itself, while Germany announced its biggest increase in defense spending since the end of the Cold War and vowed to spend above the amount recommended for NATO members in the future.
This has overshadowed the news that representatives of both Ukraine and Russia have agreed to meet on the Ukraine-Belarus border to discuss the situation “with no preconditions.”
Away from eastern Europe, Fed Chair Jerome Powell is set to testify before the House Committee on Financial Services on Wednesday, and again before the Senate Banking Committee on Thursday.
This comes ahead of Friday’s nonfarm payrolls report for February, which is expected to show that the economy added a healthy 450,000 jobs in the month.
The Federal Reserve is widely expected to start a tightening process in a couple of weeks, potentially with a hike of 50 basis points, but investors will closely follow Powell’s testimony to see whether the uncertainty caused by Russia’s actions will stay the central bank’s hand.
Oil prices soared amid fears the additional sanctions will disrupt oil shipments from Russia, the world's second largest crude producer and the largest supplier of natural gas to Europe.
Global output is already struggling to meet the rebound in consumption fueled by the reopening of economies after the pandemic, and any disruptions to Russian flows will only exacerbate this.
The Organization of the Petroleum Exporting Countries and allies including Russia, a group called OPEC+, is set to meet later this week to discuss further production levels.
By 7 AM ET, U.S. crude futures traded 4.8% higher at $96.01 a barrel, while the Brent contract rose 5.6% to $98.68.
Additionally, gold futures rose 1.2% to $1,909.35/oz, while EUR/USD traded 0.7% lower at 1.1192.