Good morning!

Yesterday trading was marked by earnings releases, M&A and new indications that the conflict in Ukraine is re-escalating. Russia reiterated its commitment to protect the Russian speakers in Eastern Ukraine and took both economic and military steps to prove its point; President Putin reportedly ordered military exercises while increasing Ukraine’s bill by a further USD11.4 billion to reflect the latter’s obligation under a take-or-pay contract. Meanwhile, Ukraine sought to secure alternative gas supplies but the European partners reckoned that they have limited means of assisting the country, given that any meaningful deal would require Russia’s approval. Specifically, Slovakia, another transit country for Gazprom’s exports, declined to direct more than 10 billion cubic meters per year to Ukraine as it tries to preserve good commercial relationships with the Russian company; this is far less than the 25.8 billion cubic meters Ukraine imported last year from Russia. Nevertheless, Ukraine is not the only one standing to incur economic losses in the follow-up of the conflict as Russia’s aggressiveness does not bode well for its capital flows and, hence for its growth. Indeed, S&P has just cut the country’s rating by one notch to BBB- , while the other two rating agencies continue to have a negative outlook for the country.

On the other hand, yesterday we received positive micro and macro data from the US which fuelled an increase in stock prices even as the geopolitical backdrop became more concerning; durable goods orders outpaced forecasts and Microsoft, Caterpillar and General Motors posted financial results above expectations. The US technology sector led the S&P500’s growth, closing 1.2% higher after Apple’s earnings pushed its stock by 8.2%; conversely, the telecommunication sector was the worst performing with a 1.7% drop.

Earlier in the day, the European stocks were supported by the 6.3% rally in Teleokm Austria which followed news that America Movil will bid about EUR1 billion to increase its stake in the company. In UK the equities rose on speculations that AstraZenca will be targeted in a buyout.

The emerging market underperformed as their resilience in the face of the Ukrainian conflict appears to be fading; the Chinese stocks were also lower as concerns on additional share issues continued to dampen the sentiment and the country’s biggest liquor maker posted lower growth in earnings. However, the Brazilian stock market closed higher than a day earlier following positive earnings surprises from Banco Bradesco.

Today’s market drivers include the UK retail sales, the US consumer sentiment gauge and new earnings releases. Among the latter we note Bank of Ireland, Electrolux, Volvo, Colgate-Palmolive, Kia Motors, Hyundai and Whirlpool. Volvo’s Q1 results came out ahead on Bloomberg consensus estimates.

Have a nice day,