Dow slips on fading hopes of an early Ukraine war ceasefire

·       Gold surged after Ukraine’s Zelenskyy refused to join US-Russia meeting in Saudi Arabia; Intel surged on a potential stake sale to Broadcom and TSMC

·       Trump threatened 25% tariffs on all imported automobiles, chips, and pharmaceuticals and also assured Ukraine war ceasefire in the coming days

·       Trump may meet Putin by the end of this month; the real reason for the Ukraine war may be the control of Ukraine’s vast reserve of untapped rare earth materials

·       Russia is now already controlling almost 50% of Ukraine’s rare earth materials land; Trump/US now wants to control the rest in exchange for war-related aids

On Friday, Wall Street Futures, Gold surged initially after softer than expected US retail sales and Trump tariffs delay but soon stumbled on finer details of retail sales, seasonal trends, and positive revisions for Dec’24, less dovish Fed and less hawkish Trump talks. Broader SPX-500 closed almost flat, while tech-heavy NQ-100 gained +0.38% and blue chip (China-heavy MNCs) DJ-30 lost -0.38%. Overall, Wall Street closed in the green on the Trump tariffs deal and progress of the Gaza and Ukraine war permanent ceasefire, while dragged by hotter-than-expected US core inflation data, mixed retail sales, and less dovish Fed/Powell talks.

Fast forward to Tuesday, high-level discussions are underway to negotiate a ceasefire in the ongoing Ukraine conflict. U.S. Secretary of State Rubio and Russian Foreign Minister Lavrov recently convened in Riyadh, Saudi Arabia, marking the most extensive U.S.-Russia negotiations in three years. The talks aim to establish a high-level team to support peace negotiations and explore post-war economic opportunities. However, the absence of Ukrainian and European representatives has drawn criticism.

Ukrainian President Zelenskyy has expressed strong disapproval of these discussions, emphasizing that any agreement reached without Ukraine's involvement is unacceptable. He criticized the U.S. for engaging in bilateral talks with Russia, suggesting that such actions undermine the unity and legitimacy of Ukraine and its European allies.

Late Tuesday, Wall Street Futures stumbled, while Gold surged after Ukraine’s President Zelenskyy confirmed he is not joining the US in Saudi Arabia right now:

·       I won't go to Saudi Arabia

·       I plan to visit Saudi Arabia in March

·       My visit to Saudi Arabia has been postponed until March 10th

·       I am waiting for the US delegation in Kyiv.

European leaders have echoed Zelenskyy's concerns, warning that a premature ceasefire could allow Russia to regroup and pose further threats. French President Macron plans to host a meeting to discuss Ukraine and European security, aiming for a more unified European stance. Meanwhile, Russia has firmly opposed any NATO troop deployment in Ukraine as part of a peace deal, insisting on banning Ukraine's NATO membership.

In parallel, U.S. President Trump appears to favor a resolution that acknowledges Russia's military advantage, focusing on economic returns for U.S. aid, including rights to Ukraine's natural resources, especially rare earth materials. This approach has raised concerns in Ukraine about a potential settlement that might favor Russian interests. Trump is also seeking payback of $500 billion from Ukraine, which the Biden admin gave Ukraine as aid/grants. Trump is planning to take almost 50% of Ukraine’s natural resources including rare earth materials and also oil & gas for almost nothing. And Ukraine/Zelenskyy now opposing the idea.

European leaders are cautioning against a ceasefire in Ukraine without a comprehensive peace agreement with Moscow. This stance emerged from a meeting in Paris convened by French President Macron, following the exclusion of European allies and Ukraine from U.S.-led discussions in Saudi Arabia regarding the conflict.

Key Points:

·       European Commitment: European nations are prepared to provide security assurances to Ukraine, but they warn against a ceasefire without a broader peace accord with Russia

·       NATO's Stance: NATO Secretary-General Rutte affirmed Europe's readiness to enhance its role in ensuring security guarantees for Ukraine.

·       EU Alignment: The EU shares President Trump's "peace through strength" philosophy, believing that a ceasefire without a peace agreement is dangerous

·       Zelenskyy's Position: Ukraine's President Zelenskyy emphasized that any fair discussions aimed at resolving the conflict with Russia should include both Ukraine and Europe. He also warned that a weak ceasefire would be a prelude to further Russian aggression.

·       US-Russia Talks: U.S. Secretary of State Rubio met with his Russian counterpart in Saudi Arabia, describing it as a preliminary move towards revitalizing peace negotiations regarding Ukraine, and refuting claims that Kyiv has been excluded from the process.

·       US Stance Shift: The Trump administration's dialogue with Moscow signals a departure from the previous approach under President Biden, with a potentially reduced affirmation of Ukraine's position. The U.S. under Trump admin may now consider it unrealistic for Ukraine to regain all its lost territory instantly and no longer supports NATO membership for Ukraine. Trump indicated systematic negotiations for this land issue after the initial ceasefire.

·       Past Ceasefire Attempts: Previous suggestions of a ceasefire by Putin have been rejected by the U.S. under Biden admin.

The latest developments regarding a ceasefire in the Ukraine war indicate a complex situation with several key points:

Ceasefire Proposals: There have been discussions around ceasefire proposals, with Russian President Putin signaling openness to a ceasefire, but with conditions that Ukraine remains neutral and accepts limits on its armed forces. These discussions have not led to a formal agreement, as Ukraine and its Western/European allies have expressed skepticism about Russia's intentions and the feasibility of such a ceasefire without substantial guarantees for Ukraine's security.

Current Military Situation: Reports suggest that fighting has continued despite ceasefire announcements, with Russia reportedly breaking the ceasefire along some lines to disrupt normal life in Ukraine, potentially not allowing Ukraine to rebuild or stabilize. Ukraine has faced significant challenges including territorial losses, particularly in the eastern and southern regions, and has been unable to advance due to these ongoing conflicts.

International Reactions: The United States and Russia have engaged in talks in Riyadh, Saudi Arabia, without Kyiv's representation, focusing on efforts to end the conflict. However, there are concerns about the outcomes of these talks, especially regarding the interests and security of Ukraine. Britain has expressed readiness to send peacekeeping troops to support any peace deal, indicating a potential for international involvement in maintaining a ceasefire or peace agreement.

Political Dynamics: There's mention of a tentative peace plan with points like Russian withdrawal in exchange for Ukrainian neutrality, but no solid agreement has been reached. The situation is further complicated by political statements from figures like Trump, suggesting a quick end to the war, though specifics on how this would be achieved remain unclear.

In summary, while there have been proposals and discussions around a ceasefire, the situation remains fluid with no definitive agreement in place. The effectiveness of any ceasefire would depend heavily on security guarantees for Ukraine and international backing to ensure compliance from all parties involved. The US and Russia are presently meeting at Foreign Minister levels to finalize a summit between President Trump and Putin in the coming days, when Ukrainian counterpart Zelenskyy may join them. Ukraine would like to have an exclusive meeting with the US in Riyadh before making any commitment. 

On late Tuesday, Trump said in a presser after signing a memorandum to impose transparency on government departments:

·       I think I have the power to end this war in Ukraine

·       Ukraine has had a seat, and this could have been settled easily

·       We won't have to put any troops in Ukraine as a part of any peacekeeping force

·       If Europeans want to participate actively in peacekeeping troops in Ukraine, then that's fine

·       I don't think we would have to remove all troops from Europe

·       Good talks between Rubio and Lavrov on Ukraine; I am more confident

·       Talks with Russia were very good

·       Probably will meet with Putin before the end of the month

·       Trump pushes for Ukraine elections- Ukraine must hold elections, questioning why none had taken place

·       Trump criticized Ukrainian President Zelensky's approval rating, claiming he said had dropped to 4%

·       Trump insisted his remarks were not influenced by Russia but reflected concerns from many other countries

·       Ukraine is being wiped out

·       Both Zelenskyy and Putin are responsible for failing to prevent the war, which killed millions of people, Ukraine is almost destroyed, while both Russia's and Ukraine's economies are on the verge of collapse.

·       EU has been very unfair to us

·       Tariffs on Pharmaceuticals probably 25% or higher

·       Auto tariffs rate probably 25%

·       We'll see official announcements over the next couple of weeks

·       I will announce CHIPS, car companies coming back to the US

·       I have been contacted by companies because of tariffs

·       I may not let Venezuela export oil, or petroleum products, via firms like Chevron

Conclusions:

Europe is divided about Ukraine’s NATO membership, while the US/Trump has already rejected it. Although Ukraine’s NATO proximity and membership issue may be the primary reason behind the Russian attack, the main issue here is the control of Ukraine’s vast untapped reserve of rare earth materials, essential for today’s modern economy including military equipment. In this way, Ukraine is now a major issue for not only European/EU politics but also economics. Europe is the biggest loser in the Ukraine war as it is dependent on Russian/imported oil & gas, foods, and also various other commodities. Overall, we may have at least a temporary Ukraine war ceasefire by March’25. German Dax-40 surged to almost 23000 levels life time high on hopes of an imminent Ukraine war ceasefire and higher NATO/Defense spending.

Market impact:

On Tuesday, Wall Street Futures closed almost flat as it stumbled from the session high (Ukraine war ceasefire optimism) as Zelenskyy almost poured cold water for an early settlement. But later Trump’s assurance helped to some extent. Trump also threatened 25% tariffs on pharma, autos, and Chips, which dragged the market. Also, hawkish Fed comments dragged the risk trade.

Trump said on Tuesday he plans to impose 25% tariffs on semiconductor and pharmaceutical imports. This follows his comments last Friday that similar levies on automobiles could take effect as soon as April 2, a day after his cabinet is set to present reports outlining potential import duties as part of his effort to reshape global trade. Speaking at his Mar-a-Lago estate in Florida, Trump did not specify a timeline for the new tariffs but indicated he wanted to allow drug and chip manufacturers time to establish US factories to avoid the duties.

Since taking office on January 20, he has already launched 10% tariffs on China, 25% tariffs on steel and aluminum imports, and planned for reciprocal tariffs targeting major US trading partners. Separately, China criticized Trump’s tariffs at a WTO meeting Tuesday, citing inflation risk, market distortions, and a possible global recession, and urging Washington to withdraw its moves and engage in multilateral dialogues. Trump 2.0 Chinese tariffs of 10% and counter-tariffs are now active.

On Tuesday, the S&P 500 rose 0.2% to close at a new record, while the Nasdaq 100 and Dow Jones finished near the flat line. Weakness in consumer discretionary and communication services, highlighted by a 2.7% drop in Meta Platforms and a 0.9% decline in Amazon, pressured the broader market. However, energy stocks outperformed, with Exxon Mobil gaining 1.8% and Energy Transfer rising 1.6%. Super Micro Computer surged on an optimistic outlook.

Intel jumped on stake sale reports; competitors Broadcom and TSMC may be considering bids for the chipmaker. Broadcom's bid would focus on Intel's chip design services, while TSMC is considering a deal for its factories. The reports follow months of similar speculation as Intel shares slumped in 2024 amid a troubled turnaround plan. TSM), the biggest chipmaker in the world, are each in the early stages of considering bids for Intel stake buy, if any. Broadcom is considering a bid for Intel's chip design business, while TSMC is focused on a deal for the manufacturing side, though it would be complex and expensive to refit Intel's factories to make chips the way TSMC usually does.

Oil surged above $72 per barrel Wednesday, extending gains for a third straight session, supported by short-term supply risks. A drone attack on a pumping station in southern Russia disrupted Kazakh crude flows to the Black Sea, potentially cutting transit volumes by 30%. Cold weather also threatened the US oil supply, with North Dakota's output estimated to drop by up to 150 kbpd. But the overall boost was limited amid the progress of the Ukraine and Gaza war ceasefire and the fading risk of an all-out war between Iran and Israel. Elsewhere, President Trump stated that Chevron’s Venezuela crude exports are under review, highlighting ongoing US-Venezuela tensions.

Gold surged to almost 2950 on fading hopes of an imminent Ukraine war ceasefire after Ukrainian President Zelenskyy refused to join US-Russia peace talks in Saudi Arabia Tuesday.

Weekly-Technical trading levels: DJ-30, NQ-100, Dax-40, and Gold

Looking ahead, whatever the fundamental narrative, technically Dow Future (CMP: 44650) now has to sustain over 45300-45500 any further rally; otherwise sustaining below 45200, DJ-30 may again fall to 44500/44100-43700/43300 and 42800/41900 and further 41200/40600-40400/40000 in the coming days.

Similarly, NQ-100 Future (22300) has to sustain over 22400 for a further rally to 22500/22700-23000/23300 in the coming days; otherwise, sustaining below 22350-22100, NQ-100 may again fall to 21700/21300-21100/20700 and further 20500/20300-20100/19250 in the coming days.

Technically, Germany’s Dax-40 now has to sustain over 23000 for a further rally; otherwise sustaining below 22900-22700, may again fall to 21800-21200 in the coming days.

Also, technically Gold (CMP: 2945) has to sustain over 2965-2975 for a further rally to 3000/3025-3050/3075; otherwise sustaining below 2955-2950 may again fall to 2925/2895-2875/2860 and 2840/2825-2800/2780 and 2750/2740-2725/2690 and further 2675/2655-2610/2560 in the coming days.