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March 4, 2022, 8:46 a.m. EST

Why Russia’s invasion of Ukraine may be the preamble to a second Cold War, leading to more volatility and supply shocks

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By Steve Goldstein

To say this has been an eventful week has been an understatement. Through Friday morning, the 16% weekly surge in the S&P GSCI index /zigman2/quotes/210598561/delayed XX:SPGSCI -0.37% tracking commodities is the highest in at least 50 years. The cause, of course, is the invasion of Ukraine by commodities supplier Russia, and the package of Western sanctions triggered in response.

A commentary by Craig Fuller, chief executive of the trade publication FreightWaves, has helped put it into perspective. “If the Russia-Ukraine conflict’s international ramifications keep spreading, we face a real possibility of a bifurcating global economy, in which geopolitical alliances, energy and food flows, currency systems, and trade lanes could split,” warned Fuller. He said the world of the first Cold War is being recreated.

“Entire supply chains will be rewritten, with new sources and partners — all in the interest of corporate and national security. This will create massive volatility and unpredictability,” says Fuller. Consumers will face higher prices, but also reward brands that consistently and predictably provide availability.

“The Ukraine crisis is perhaps the end of the preamble to a long history of geopolitical, economic and military conflict between the East and West in the second Cold War. Now the plot is thickening. State actors such as Russia and China are choosing regional hegemony over global integration — we will see this play out further in the Baltics and the South China Sea, not to mention the Middle East and the greater Pacific,” said Fuller.

Hat tip to Michael Every, the global strategist at Rabobank who spotted this analysis. Every says a possible Iran nuclear deal could lead to still more volatility, rather than quell it, either from the Saudis stopping investment in the U.S. or the Israelis taking matters into their own hands.

Liquidity is evaporating, leading to “trades of decent size” seeing outsize price. “In short, the bid-offer spread is as far apart as [Vladimir] Putin and any leader he talks to at his big table; or Russia and the rest of the world. Expect those spreads to get wider and wider until something breaks. Which won’t be helped by the Fed, which [Jerome] Powell says will plow on while everything not under its remit crumbles,” said Every.

Granted, U.S. stocks have held up well this week, with just a 1% drop for futures on the S&P 500. Even in the 1970s when global architecture collapsed, the U.S. managed to emerge stronger and more central. Rabobank’s Every says the fundamentals say that could happen again, but the journey ahead could be shocking.

The buzz

The Labor Department reported an above-forecast 678,000 rise in nonfarm payrolls in February, as the unemployment rate fell 0.2 points to 3.8%. One surprise was that average hourly wages didn’t grow at all. “The return to work may have been a contributor to the weakness in wages, but it is tough to read too deeply into a single print,” said Thomas Simons, an economist at Jefferies.

A fire at Europe’s biggest nuclear plant after Russian shelling was extinguished, with no change in radiation levels , as Russian forces seized control. Though negotiators agreed on humanitarian corridors, the Russian invasion of Ukraine continued. Standard & Poor’s lowered its credit rating on Russia to CCC- from BB+ with a negative outlook.

Gap /zigman2/quotes/206554267/composite GPS +4.56% shares rallied 7% on a smaller-than-forecast loss and better outlook, continuing a string of good results from the retail sector.

Sony /zigman2/quotes/208567357/composite SONY -0.89% and Honda /zigman2/quotes/207173990/composite HMC -2.48% said they would team up to develop and sell electric vehicles.

The market

U.S. stock futures /zigman2/quotes/209948968/delayed ES00 -0.04% /zigman2/quotes/210219788/delayed NQ00 +0.04% slumped, and the euro /zigman2/quotes/210561242/realtime/sampled EURUSD -0.6333% fell below $1.10 for the first time since May 2020.

The Stoxx Europe 600 /zigman2/quotes/210599654/delayed XX:SXXP +1.61% dropped nearly 3%.

Top tickers

Here were the most active stock-market tickers as of 6 a.m. Eastern.

Ticker Security name
/zigman2/quotes/203558040/composite TSLA Tesla
/zigman2/quotes/200235402/composite AMC AMC Entertainment
/zigman2/quotes/203755179/composite GME GameStop
/zigman2/quotes/204905836/composite NIO Nio
/zigman2/quotes/202934861/composite AAPL Apple
/zigman2/quotes/204868203/composite MULN Mullen Automotive
/zigman2/quotes/201948298/composite BABA Alibaba
/zigman2/quotes/200467500/composite NVDA Nvidia
Meta Platforms
/zigman2/quotes/208144392/composite AMD Advanced Micro Devices

Random reads

The Ukraine conflict has at least produced this viral interview on Indian television.

Newark, New Jersey’s council voted to suspend the licenses of local Lukoil gas stations and convenience stores .

It turns out lions aren’t very good at climbing trees .

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/zigman2/quotes/210598561/delayed
XX : S&P GSCI
676.64
-2.53 -0.37%
Volume: 0.00
July 6, 2022 9:01a
loading...
/zigman2/quotes/206554267/composite
US : U.S.: NYSE
$ 8.72
+0.38 +4.56%
Volume: 8.64M
July 5, 2022 4:03p
P/E Ratio
N/A
Dividend Yield
6.88%
Market Cap
$3.12 billion
Rev. per Employee
$166,557
loading...
/zigman2/quotes/208567357/composite
US : U.S.: NYSE
$ 80.95
-0.73 -0.89%
Volume: 789,745
July 5, 2022 4:00p
P/E Ratio
12.87
Dividend Yield
0.48%
Market Cap
$99.23 billion
Rev. per Employee
$810,754
loading...
/zigman2/quotes/207173990/composite
US : U.S.: NYSE
$ 23.61
-0.60 -2.48%
Volume: 2.13M
July 5, 2022 4:00p
P/E Ratio
6.43
Dividend Yield
3.49%
Market Cap
$40.73 billion
Rev. per Employee
$634,714
loading...
/zigman2/quotes/209948968/delayed
US : U.S.: CME
$ 3,832.50
-1.50 -0.04%
Volume: 235,959
July 6, 2022 8:01a
loading...
/zigman2/quotes/210219788/delayed
US : U.S.: CME
$ 11,813.50
+5.00 +0.04%
Volume: 125,309
July 6, 2022 8:01a
loading...
/zigman2/quotes/210561242/realtime/sampled
US : Tullett Prebon
1.0200
-0.0065 -0.6333%
Volume: 0.0000
July 6, 2022 9:11a
loading...
/zigman2/quotes/210599654/delayed
XX : STOXX
407.15
+6.47 +1.61%
Volume: 0.00
July 6, 2022 2:56p
loading...
/zigman2/quotes/203558040/composite
US : U.S.: Nasdaq
$ 699.20
+17.41 +2.55%
Volume: 28.26M
July 5, 2022 4:00p
P/E Ratio
94.87
Dividend Yield
N/A
Market Cap
$706.34 billion
Rev. per Employee
$626,347
loading...
/zigman2/quotes/200235402/composite
US : U.S.: NYSE
$ 12.78
-0.75 -5.54%
Volume: 30.34M
July 5, 2022 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$6.60 billion
Rev. per Employee
$101,458
loading...
/zigman2/quotes/203755179/composite
US : U.S.: NYSE
$ 120.23
-3.19 -2.58%
Volume: 1.51M
July 5, 2022 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$9.40 billion
Rev. per Employee
$509,358
loading...
/zigman2/quotes/204905836/composite
US : U.S.: NYSE
$ 22.18
+0.82 +3.84%
Volume: 50.66M
July 5, 2022 4:04p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$36.69 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/202934861/composite
US : U.S.: Nasdaq
$ 141.56
+2.63 +1.89%
Volume: 73.43M
July 5, 2022 4:00p
P/E Ratio
23.01
Dividend Yield
0.65%
Market Cap
$2291.17 billion
Rev. per Employee
$2.51M
loading...
/zigman2/quotes/204868203/composite
US : U.S.: Nasdaq
$ 0.99
-0.09 -8.32%
Volume: 41.60M
July 5, 2022 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$359.04 million
Rev. per Employee
N/A
loading...
/zigman2/quotes/201948298/composite
US : U.S.: NYSE
$ 120.13
+4.13 +3.56%
Volume: 21.02M
July 5, 2022 4:02p
P/E Ratio
39.18
Dividend Yield
N/A
Market Cap
$311.02 billion
Rev. per Employee
$528,633
loading...
/zigman2/quotes/200467500/composite
US : U.S.: Nasdaq
$ 149.64
+4.41 +3.04%
Volume: 65.22M
July 5, 2022 4:00p
P/E Ratio
40.16
Dividend Yield
0.11%
Market Cap
$363.07 billion
Rev. per Employee
$1.31M
loading...
/zigman2/quotes/208144392/composite
US : U.S.: Nasdaq
$ 75.20
+1.53 +2.08%
Volume: 95.69M
July 5, 2022 4:00p
P/E Ratio
28.05
Dividend Yield
N/A
Market Cap
$121.86 billion
Rev. per Employee
$1.22M
loading...

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