Critical information for the U.S. trading day

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In between the market debate over hot inflation and the stability of the nation’s banking system, word came Tuesday that a Russian fighter jet collided with an American drone.

Whether you chalk it down to a couple of Russkie top guns having fun — they did first dump fuel on it, and flew in front of the unmanned vehicle — it’s a reminder of the broader conflict which has seen Russia nearly excommunicated from the global financial system, on a day the U.S. Treasury issued a statement touting the success of the price cap on Russian oil.

That leads nicely to a recent research report written by 13D Research & Strategy, a thematic investment research firm, which tackled the subject of the investment implications of the race for Arctic dominance. As the Earth warms due to climate change, more efficient shipping lanes are opening up, at a time when the relationship between the U.S. and Russia has rarely been worse. That’s not to mention the roughly 160 billion barrels of oil and estimated $1 trillion worth of metals and minerals located there.

And while Russia has struggled on the battlefield vs. Ukraine, the country is widely regarded as having superiority in the colder region, with several deep-water ports in the Arctic, the world’s most advanced fleet of icebreakers — the U.S. Navy has none — and more bases than NATO countries in the region.

The U.S. and the other Arctic Council members — Canada, Denmark, Finland, Iceland, Norway and Sweden — are playing catch up. The U.S. last year reactivated the 11th Airborne division in Alaska for the first time in decades, and through Friday is conducting a training exercise in Finland and Norway focused on building Arctic military capabilities and cooperation, not just with those countries but also with troops from Denmark, Germany, the Netherlands and the U.K.

And of course, there’s big money being spent, too. Defense contractors including Lockheed Martin (LMT), L3 Harris (LHX), Northrop Grumman (NOC), Raytheon (RTX) and AeroVironment (AVAV) offer products for Arctic deployment, and Israel’s Elbit Systems (ESLT)offers Arctic-capable unmanned aerial vehicles, says the 13D report. Several European and Nordic defense companies stand to benefit, including Saab (SAABY), BAE Systems (UK:BA), recent DAX entrant Rheinmetall (XE:RHM), Hensoldt (XE:HAG) and Leonardo (IT:LDO).

Granted, defense stocks actually tailed off after a big initial rally when Russia first invaded Ukraine, and have zig-zagged since then. The 13D team say the defense stocks are part of a longer-term trend toward deglobalization, that could play out over decades.

In other reports the firm has highlighted less well-known companies including Japan’s Mitsubishi Heavy Industries (JP:7011), Kawasaki Heavy Industries (JP:7012), Ishikawa Seisakusho (JP:6208), Howa Machinery (JP:6203) and Hosoya Pyro-Engineering (JP:4274); India’s Bharat Electronics (IN:500049), Bharat Dynamics (IN:541143)and Hindustan Aernoautics (IN:541154); and South Korea’s Hanwha Aerospace (KR:012450), Hanwha Systems (KR:272210), LIG Next1 (KR:079550), Korea Aerospace Industries (KR:047810) and Hyundai Rotem (KR:064350), as those countries look to build out their defense capabilities.

The market

U.S. stock futures (ES00) (NQ00) are slumping ahead of a new slate of economic reports as worries about the banking sector continued. The yield on the 10-year Treasury fell.

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The buzz

Retail sales highlights the day’s economic calendar, which also includes producer prices and the Empire State manufacturing index.

Credit Suisse shares (CS) tumbled to a new record low in Zurich, a day after it revealed material weaknesses in financial controls.

Regional banks including First Republic Bank (FRC) continued to be active in premarket trade.

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