Geoffrey Smith 

Investing.com — China’s stock markets continue to fall due to fears about a Covid-driven slowdown, and the political pressure being applied by Washington on Beijing. China has refused to condemn Russia’s invasion in Ukraine, despite seven hours’ of intensive talks with U.S. authorities on Monday. Russian bombardments increase, while European data indicate a growing degree of stagflation. As OPEC prepares for its monthly report, the Fed begins its two-day policy meeting. Oil is now back below $100 a barrel. This is what you should know about financial markets Tuesday 15 March.

1 Russian bombardment intensifies after inconclusive talks

Russia’s air and artillery bombardment of Ukrainian cities intensified after a day of intense diplomacy that ultimately yielded little. Chinese officials reiterated their desire to avoid Western sanctions, but they refused to condemn Russia for its invasion.

At least two Russian drones inflicted on NATO members Poland or Romania have been detected.  

Late Thursday, the European Union added Russia to its list of sanctions and banned Russian luxury exports. This led to a decline in stock prices for this sector on what was already a poor morning for European stocks. It was marked by a miss on Germany’s key sentiment indicator, ZEW, and an overshoot of French inflation.

2. U.S. inflation due to Fed meeting; U.K. job data maintain rate hike in line

Inflation is on the radar later in the U.S. too, as February’s producer price inflation data are released. Analysts expect a 0.9% rise on the month, taking the annual rate up to 10.0% – a sombre backdrop for the start of the Federal Reserve’s two-day policy meeting.

Widely expected, the Fed will increase the Fed Funds Rate Target by 25 Basis Points. This is the Fed’s first rate rise since 2018. Following the comments made by Fed Chair Jerome Powell during his testimony to Congress a few weeks ago, a more aggressive increase of 50 basis points seems less likely. The possibility of this occurring may be eliminated by the sudden drop in oil price over the last few days.

Economic data in the U.K. also support the call for an unexpected third straight rise of interest rates when the Bank of England meets later in the week. While the jobless rate dropped below its level before the pandemic, average earnings growth was much higher than expected.

3. Stocks will open at a lower level  

Under pressure from China and Europe’s weakness, the U.S. stock market will open lower than usual.

At 6:15 AM ET, they had fallen 81 points (or 0.3%) while the 0.2% were unchanged. This reverses Monday’s pattern, in which the tech-heavy Nasdaq performed poorly.

Additionally to the PPI survey, New York Empire State Manufacturing is due. Dole, however, has a very sparse earnings calendar.

Other stocks likely to be in focus include Nielsen, after reports that it’s in talks to sell itself to a consortiuim including Elliott Management.

4. China stock market rout continues; Covid wave surpasses strong data

China’s stock rout deepened, as investors continued to flee from a growing number of risks.

Talks between U.S. and Chinese officials on Monday did little to banish fears that China could get drawn into the web of western sanctions as a result of its continued support for Russia’s invasion of Ukraine, while authorities have now locked down over 45 million people in two big industrial hubs at opposite ends of the country to stop the spread of Covid-19.

Tech stocks are still stressed. The Tech index suffered another 11% loss on Tuesday, and now has lost all its gains from the pandemic. The loss of other benchmark cash indexes was between 2 and 5 percent.

This was despite the fact that retail sales and industrial production were both higher than expected in February. These data were somewhat influenced by other events. The yuan dropped to a 2-month low.

5. China’s slowdown worries have pushed oil back to $100; API inventories due, OPEC report monthly

For the first time in a month, crude oil prices dropped below $100 per barrel. Other commodities continued to rise on concerns of an economic slowdown in China due to the coronavirus.  This is outweighing new geopolitical tension signs, as agents believed to be linked with Iran have launched the most severe cyberattack ever on Israel late Monday.

At 6:25 AM ET futures had fallen 5.9% to $96.97. They were just holding above the $100 mark at $100.70. This was down 5.8%.

American Petroleum Institute (based in the USA) will issue its weekly inventory assessment at 4:30PM ET. While the Organization of Petroleum Exporting Countries’ monthly report will be released on the global oil markets, the Organization of Petroleum Exporting Countries is expected to release its monthly update. It’s expected to repeat the bloc’s messaging that there is no physical shortfall of supplies (despite failing to meet its own production targets in recent months).