Peter Nurse 

Investing.com – The Russian President Vladimir Putin’s decision to recognise two separatist regions in Ukraine, and then send troops there is having an enormous impact.  The stock market is expected to open lower with an eye on earnings. Home Depot (NYSE:) and Macy’s (NYSE:). The ruble has seen volatile trading while crude and prices soar. The CB confidence numbers will be released, and the German Ifo has surprised everyone to the upside. This is what you should know about financial markets Tuesday 22 February. 

1. Russia enters eastern Ukraine

The tensions between Russia and the West escalated after Russian President Vladimir Putin declared two independent republics to be in Ukraine’s east and directed his forces into these regions.

After weeks of Russia deploying troops at the Ukraine border and holding large-scale military exercises in Belarus, the U.S. warned that an invasion was possible. 

U.S. President Joe Biden quickly issued executive orders interdicting trade with two of the breakaway areas. Further sanctions are likely to be imposed by the U.S. along its European allies.

Investors now want to know if Putin has his troops out of Ukraine’s east, or whether he plans on invading the entirety of Ukraine including its capital, Kiev. Even though some European countries are wary about the potential economic consequences of penalizing Russia due to their dependence on Russia for gas imports, the West would likely impose even harsher sanctions.

2. Ruble drops to 15 months low; then it recovers

The financial repercussions of Putin’s move into Ukraine are already being felt, with the Russian ruble sinking to a more than 15-month low on Tuesday before paring some losses.

At 6 AM ET, fell 0.9% to 79.0274, after climbing to 80.5825 in early trade, the pair’s strongest level since Nov. 2, 2020.

The Russian central bank made comments that helped the ruble rise off its lowest levels. It stated it is ready to help financial stability and was willing to do so.

According to the central bank, banks will be allowed to use market values of bonds and stocks in their portfolios starting February 18, which is before the Ukraine move, as long as they are included in earnings reports up until October.

JPMorgan has also changed its position on Russian equity to “neutral” and “overweight”, anticipating further stock market falls in the future. The bank stated that Russia might not be able to pay foreign shareholders in case of severe sanctions.

3. Stocks to Open Lower on Eastern European Concerns

U.S. stock exchanges will open lower as U.S. investor return from weekend long to absorb the increase in tensions between Eastern Europe and the U.S.

At 6 AM ET they had fallen 55 points (or 0.2%) while the 0.1% was down and 0.5% were at 0.5%.

The corporate earnings season is drawing to a close, and just under 80% of the around 400 of the companies listed on the have beaten analysts’ expectations, according to data from FactSet.

More results are expected today from the likes of Home Depot and Macy’s before the bell, and Caesars Entertainment (NASDAQ:) after the close.

In other places, the eyes will be on General Electric (NYSE:) after the conglomerate’s stock slumped on Friday’s losses following a cautious outlook. HSBC will be under scrutiny as well, after the bank reported a close doubling its fourth quarter profit before tax, which was $2 billion. The lender also announced a 500 million charge due to Chinese commercial realty exposure. 

4. U.S. Consumer Confidence Up Next After German Ifo Shines

Tuesday’s U.S. economic data slate includes the numbers for February and February release. Both are expected to show slight improvement over February.

The widely-followed German Business Morale Index rose to 98.9 in February, an increase of 96.0 from January. This is the highest since August 2013.

Carsten Brzeski, an ING economist, stated that while such a high reading is expected to spread optimism, the Russia-Ukraine developments of last night have likely made this indicator more backward-looking.” In a note.

5. Prices of European crude natural gas soar 

After President Vladimir Putin recognized two regions of Ukraine that were formerly part of Russia as new republics, crude oil prices and European natural gas prices rose dramatically.

Russia’s move is a dramatic escalation in its standoff with the West over Ukraine, and a conflict could threaten Russian gas supplies to Europe, about a third of which typically travel through pipelines crossing Ukraine. These developments could lead to Western European countries looking for alternative energy options, such as crude oil from the global marketplace.

Additionally, the U.S. and its European allies could well impose sanctions on Russia, with curbs to Moscow’s ability to trade in foreign currency likely to disrupt energy markets.

Futures rose 4.1% to $93.97 per barrel at 6:01 AM ET. They were also up 2.6% to $95.41 per barrel. This was after the futures had climbed up to their highest point since September 2014. 

At $2.9191/gallon, they were up 3.8%