The Daily Chase: Oil price rout continues; Russia spirals towards debt default

The rout in oil prices is continuing today as the investing world sorts through Ukraine-Russia talks, China’s attempt to distance itself from the barrage of global sanctions directed at Moscow, and the U.S. Federal Reserve decision that looms.

The rout in oil prices is continuing today as the investing world sorts through Ukraine-Russia talks, China’s attempt to distance itself from the barrage of global sanctions directed at Moscow (and its domestic battle to contain COVID), and the U.S. Federal Reserve decision that looms tomorrow. West Texas Intermediate crude has been down more than nine per cent this morning, and has tumbled more than 20 per cent since the surge to US$130.50 per barrel last week. We’ll chase insight on the outlook for oil and its entire ecosystem (keep in mind that just yesterday, BMO was talking up the investing case for the oilfield services sector). Only one of the S&P/TSX Composite Index’s subgroups has been harder hit than energy since the start of last week: info tech. And since the start of the year, the group has tumbled 44 per cent. We’re chasing perspective on the investment case (or not) for tech stocks.

RUSSIA DEFAULT WATCH

The invasion of Ukraine is causing a world of hurt of Russia’s economy. Check out the WB screen on the Bloomberg terminal, which shows the yield on debt coming due in 2031 sitting at 13.02 per cent. Compare that to the EMEA region’s economic powerhouse, where Germany can borrow 10-year money at a yield of just 0.35 per cent. No surprise then that our Bloomberg partners have thrown a small army at covering the possibility of a Russian default as approximately US$117 million in interest payments start coming due tomorrow. As for what happens if payments are missed (or made in a currency other than the denomination of the debt), that’s where things get messy. “As a practical matter, people may have to just stare at each other for a little bit,” is how restructuring expert Tuck Hardie described it in Bloomberg’s reporting.

ROGERS-SHAW, ONE YEAR LATER

It was last March 15 when Rogers Communications announced a long-awaited agreement to acquire Shaw Communications. As we were reminded in the last 24 hours or so, the deal still has to clear regulatory hurdles. And that’s likely the reason why Shaw shares are trading at a discount to the takeover offer of $40.50 per share, and have in fact never once touched the takeout price since the deal was announced. We’ll chase insight on downside and upside risk in the weeks ahead.

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