Stock futures pointed to a rough start to the month for equity markets as oil prices surged and investors continue to monitor the fighting between Russia and Ukraine. The decline in index futures came as satellite cameras captured a convoy of Russian military vehicles apparently on its way to Kyiv. Some of the early stock losses were offset by strong earnings reports from retailers (we also forgot it was still earnings season), but the Ukraine crisis remains front of mind for investors. Ukrainian and Russian officials wrapped up a critical round of talks Monday, and heavy sanctions from the U.S. and its allies are hitting the Russian economy and central bank. Major companies are abiding by the sanctions from the U.S. and its allies, with Mastercard and Visa blocking Russian financial institutions from their networks.

The war in Ukraine likely won’t prevent central banks from raising rates, but any aggressive moves are becoming unlikely. Mid-February, Fed Funds futures were pricing in almost 7 hikes in 2022, now that has eased to 5 – similar levels as at the start of February. Given the U.S.’ strong labour market and central banks’ desire to tame higher inflation, it will be hard to come off that. Canadian markets are still projecting 6. As if the decision wasn’t already complicated before Russia’s war. The 10-year treasury yield declined on Thursday to an intraday low of 1.85, and after checking back has now declined through that to 1.74% at the time of writing. German benchmark 10-year Bunds rallied back into negative yield territory after spending all of February in positive territory.

Western sanctions continue as the U.S., and its western allies including Canada have blocked Russia’s central bank from tapping into its emergency reserves of $630 billion that the country has amassed in recent years. The coordinated actions block Russia from selling dollars, euros and other foreign currencies in order to stabilize the tumbling ruble and hinders the country from using monetary tools to stabilize the economy. Speaking bluntly, the governor of the Bank of Russia stated “the conditions for the Russian economy have altered dramatically….the banking sector is now experiencing a structural liquidity deficit.” Just to put it in perspective, the dramatic moves to isolate Russia from the global financial system has effectively locked up $500 billion in securities - according to Central Bank of Russia data, at the end of 2021 foreign investors held $62 billion in sovereign debt, two thirds of which was denominated in rubles and the nominal foreign debt of Russian banks and corporations totaled $381 billion. The Moscow Exchange data showed that foreigners held $86 billion in Russian equities.

Last summer Canada ushered in a new era for legal sports betting. The changes brought in was a milestone that took years to accomplish which required federal lawmakers to alter the Criminal Code. But according to a new report, the vast majority of people didn't notice. Just one in five, Canadians recently polled say they were aware that single-event sports betting is now legal. The change this past summer brought Canada closer in line with rules in the United States, where the sports betting industry has boomed in recent years. The move ended the long-standing requirement to spread bets across multiple games and matches and gave provinces the authority to regulate new types of betting.

Russia apparently banned its residents from transferring hard currency abroad (not that it would be easy to do so), as Putin seeks countermeasures against countries imposing sanctions over the invasion of Ukraine. With many Russian citizens now cut off from being able to move their rubles, dollars, euros or anything else, they have been moving to decentralized applications which has helped Bitcoin rally. Bitcoin surged the most since July amid speculation cryptocurrencies will gain favour in the wake of sanctions against Russia. Trading volumes in Bitcoin using the ruble rose to the highest level since May which helped Bitcoin and Ether soar yesterday following a volatile weekend. Bitcoin gained as much 12% to $41,946, while Ether gained about 8.7%.

Doug Ford yesterday said that Ontario will introduce legislation to establish a minimum wage and other rights for gig economy workers such as drivers for ride-hailing companies. The legislation, which Ford called a first for a Canadian province, includes clarity around hours and pay calculations. It also includes protection against dismissal from a digital platform without proper notice or explanation, and ensure tips that workers earn remain with them. The legislation comes after a huge shift in the labour market brought on by Covid saw many workers taking on gig work. The proposal will have to go through the legislative process and be voted on by the provincial parliament, though Ford's government holds a majority, making its passage likely.

Diversion: Good cop, bad cop.

Bank of Nova Scotia reported better-than-expected earnings and demonstrated continued progress in turning around its Latin America-focused international unit in the fiscal first quarter. Scotiabank increased fiscal first-quarter government and commercial loans 8.2% from a year earlier in its international division and 16% in its Canadian unit.

Bank of Montreal also topped earnings estimates and reported a recovery of its provisions for credit losses of $99 million for the quarter compared with a provision for credit losses of $156 million a year ago. BMO has been the top-performing major Canadian bank stock over the past year as it managed to control expenses and increase lending. This success helped in lead its $16.3 billion agreement to buy BNP Paribas SA’s Bank of the West unit.

With Canada’s banks first quarter earnings season in the books, the banks have shown resilience in weathering the Covid-19 crisis with strong mortgage growth and a hot housing market. That lending strength is now broadening to other categories as economies recover from the earlier phases of the pandemic and omicron-variant infections dissipate, prompting commercial loan growth.

Target is looking to open 10% higher after reporting a boost in fourth-quarter earnings and put to rest margin inflation concerns that had investors concerned about the retailer. Target also unveiled a beyond 2022 longer-term outlook and pledged to build on the extraordinary sales gains recorded since the beginning of the pandemic.

Visa and Mastercard have blocked certain Russian activity from their payment networks to comply with international sanctions. They did not name affected customers, but cited efforts around the world to isolate Russia from the financial system. This comes after the U.S. last week placed a number of Russian individuals and financial institutions on a sanctions list called the Specially Designated Nationals list which effectively blocks U.S. companies and people from doing business with any individual or entity on that list.

Oil prices are jumping higher as Russian supply disruptions outweighed a coordinated international release of crude inventories between 60 and 70 million barrels. Major oil and gas companies, including BP and Shell, have announced plans to exit Russian operations and joint ventures and buyers of Russian oil are also facing difficulty over payments and vessel availability as Western sanctions in response to the invasion of Ukraine take hold. The International Energy Agency is set to hold an extraordinary ministerial meeting later today to discuss what role its members can play in stabilizing oil markets. At the time of writing, NYM WTI Crude futures are up +5.39% to US$100.86/bbl and ICE Brent Crude futures are up +5.82% at US$103.66/bbl.

Commodities from aluminum to wheat and gold rallied in a jittery start to the week, as traders grappled with a fraught geopolitical environment and an array of supply risks triggered by war in Ukraine. Aluminum surged to a fresh record, while nickel rose and wheat advanced near its highest level in more than 13 years. Gold has outdone other haven assets including Treasuries, the yen and the Swiss franc in February with an advance of about 6% while high oil prices are diminishing the appeal of bonds.

When it rains, it pours. Fresh off a week where the public bonds of noted real estate developers Logan Group Co. and Shimao Group Holdings Ltd. plunged to record lows, the beleaguered property sector in China may be facing an even more ominous concern on the horizon. Data from the China Real Estate Information Corp. is reporting that homes sales in the nation’s property industry plunged by -47% last month versus this time in 2021. That adds to the -40% sales decline in January year-over-year and is almost certainly going to put pressure on whether the issuers will be able to service debt obligations and refinance upcoming maturities. There is CNY ¥37.5 billion (USD $5.7 billion) of onshore Yuan notes set to mature in March plus another USD $3.7 billion in coupon payments also scheduled this month. With recent worries over undisclosed debt having resurfaced over the past few weeks that have led to calls for sweeping auditor changes, there is chatter that national policy adjustments are forthcoming over the next few weeks that will come in the form of easier lending standards for borrowers.

The Reserve Bank of Australia did the expected and kept its cash rate target at 0.1% last night as it watches the unfolding economic fallout from Russia's invasion of Ukraine. It’s the 15th consecutive month that lending rates remained at a record low and with the recent bout of geopolitical tensions, policymakers reiterated the fear of uncertainty over the persistent pick-up in Australia's inflation rate. CPI is expected to increase further in coming quarters to around 3.25% before declining to the 2.75% area next year. Meanwhile, officials expect the unemployment rate to fall to below 4% later in the year and stay there throughout 2023. The Committee added that wage growth would stay modest and that it would be unlikely for the growth in labor costs to match headline inflation for some time. The RBA reiterated that it was prepared to be patient and would not increase the cash rate until actual inflation is sustainably within the 2%-3% target range.