US President Joe Biden has warned Chinese President Xi Jinping that the US will retaliate against him if he actively supports the Russian special operation in Ukraine. Meanwhile, Xi outlined a subtle shift in China’s COVID-19 policy to reduce the strain on its economy. Russia has avoided default – at least for now – but oil prices continue to rise on fears of escalation. GameStop shares fell after an unexpected loss during the holiday quarter. Here’s what you need to know about the financial market on Friday, March 18.

1. Biden and Xi talks

According to U.S. Secretary of State Anthony Blinken, President Joe Biden will hold talks with his Chinese counterpart Xi Jinping and warn him that China will face “costs” if its verbal support for Russia in Ukraine turns into more substantial assistance.

According to various reports, the US is determined to stop China undermining Western sanctions against Russia and deter it from sending military aid to the Kremlin. Russia denies that it has asked for help.

Two weeks ago, China, like India, abstained from a U.N. motion to condemn the Russian special operation, and official media have largely stuck to the Russian line, blaming the U.S.-led NATO expansion for triggering the conflict. Chinese officials have repeatedly expressed concern about the damage to the global economy caused by sanctions imposed by the U.S., EU and their allies.

U.S. Federal Reserve officials Michelle Bowman, Charles Evans and Tom Barkin are scheduled to speak a little later today to recap developments earlier this week.

2. Russia avoided default

Sanctions against Russia may not actually be as tough as they say. Russia has reportedly made its international debt payments using Central Bank reserves that were frozen under the measures announced 2 weeks ago.

News reports say that bondholders have started receiving interest payments totaling $117 million. The default that would have sent shockwaves through the world of emerging market debt has not occurred.

Bloomberg reported that various leading Russian companies such as Norilsk Nickel and Severstal have also repaid their foreign debt obligations. Russia’s central bank will hold another monetary policy meeting later in the day, and its head Elvira Nabiullina, who was previously re-nominated by President Vladimir Putin for a new term, will likely be asked about payments made both this week and future ones.


3- U.S. market set to open lower; Boeing and Delta deal in focus

The stock market in the U.S. is set to open slightly later but still in the plus side for the week after two days of solid gains after the Federal Reserve raised interest rates for the first time in more than 3 years.

By 06:15 a.m. ET (10:15 GMT), Dow Jones futures were down 187 points, or 0.5%, while S&P 500 futures were down 0.6% and Nasdaq 100 futures were down 0.7%. All 3 indexes were up more than 1% on Thursday after rising even more immediately after the Fed’s decision on Wednesday.

Stocks likely to be in the spotlight a little later are Boeing, which Reuters reports is in preliminary talks with Delta Air Lines to order about 100 737 MAX 10 planes. FedEx will be in the spotlight after its earnings reports showed rising price pressures, while GameStop’s turnaround is again in doubt after the company reported an unexpected loss during the holiday quarter.

4. Xi signaled a change in policy on COVID-19

Chinese leader Xi Jinping signaled a shift in the country’s “zero tolerance” policy toward COVID-19, bolstering hopes that his country is putting up with a virus that is already too difficult to suppress completely.

China will “strive to achieve the maximum prevention and control effect at the lowest cost and minimize the impact of the pandemic on economic and social development,” Xi said at a Politburo Standing Committee meeting on Thursday, Bloomberg reported.

Restrictions in Shenzhen and Jilin over the past 2 weeks have not been as severe as those in 2020, though they have been enough to lead to massive factory closures. Shenzhen, a major manufacturing center, will ease restrictions soon, local authorities said on Thursday, without giving an exact date.

Meanwhile, Hong Kong still has one of the highest death rates in the world over the past 2 years as a combination of low vaccination rates and high population density takes its toll.

In Europe, Germany is also set to lift most COVID-19 restrictions from Monday, despite the continued rise in infections.

5. Oil prices rose on fears of escalation in Ukraine

Crude oil prices rose again on Friday as fears of further escalation of the conflict in Ukraine prevail.

By 06:30 a.m. ET (11:30 GMT), WTI crude futures were up 1.3% to $104.35 per barrel, while Brent crude futures rose 1.3% to $107.97 per barrel.

However, fears that Western sanctions could lead to a sudden halt in Russian exports do not seem to have materialized. According to Kpler data cited by the Financial Times, India has quadrupled its imports of Russian oil this month to about 360,000 barrels per day.

The week will be rounded off with US rig count data from Baker Hughes and positioning data from the CFTC.