Morning Report

April 27, 2022

“The 10-year US Treasury yield touched 2.94% on Tuesday, its highest level since late 2018, as investors sell out of bonds amid concerns around inflation and slowing economic growth. Meanwhile, the dollar has reached its highest level versus the euro since 2017 after Moscow choked Europe’s gas flows.”

Tim Hallinan – Trading Director

Main Headlines

The US has urged its allies to move “heaven and earth” to keep Kyiv stocked with weapons – as Russian forces continue to rain fire on eastern and southern Ukraine. It came amid growing international fears the war was beginning to spill further over borders. And in a separate, apparently defiant move, it seemed Ukraine had begun taking the fight to its aggressor’s door – with reports of explosions at a weapons dump at Belgorod, inside Russia. Meanwhile, in Germany, US Defence Secretary Lloyd Austin convened a meeting of officials from about 40 countries at the American air base at Ramstein. There, he urged delegates to leave “with a common and transparent understanding of Ukraine’s near-term security requirements because we’re going to keep moving heaven and earth so that we can meet them”. Alarmingly, Anatoly Antonov, the Russian Ambassador to the United States, said this week that the United States should stop sending arms to Ukraine, and warned that large deliveries of weapons from the West were making the conflict worse.

UK ministers are split over proposals to slash some food tariffs in a bid to ease the country’s cost of living crisis, a person familiar with the matter said. Brexit Opportunities Minister Jacob Rees-Mogg is pushing the plan, which would see the UK slash import tariffs on products it doesn’t cultivate domestically. It’s also backed by Prime Minister Boris Johnson, but opposed by the Department for International Trade, which argues the UK would lose leverage in trade negotiations. The cabinet split was reported earlier by the Financial Times, which said Chancellor of the Exchequer Rishi Sunak is open to the plan, even though it could cost a figure in the low hundreds of millions of pounds in lost revenues. The soaring cost of living has risen to the top of the domestic political agenda as inflation at a three-decade high increasingly puts the squeeze on household budgets. It’s an issue that threatens to weigh on Johnson’s Conservative Party at local elections on the 5th of May.


Sterling is well bid against most major currencies overnight. Ministers have pitched ideas to tackle the cost of living, as record inflation pushes up food and energy prices. Prime Minister Boris Johnson called for proposals from his team – that do not rely on spending taxpayers’ money – during yesterday’s cabinet meeting. The prime minister said he wanted to reduce childcare costs by easing health and safety rules, and sources said Transport Secretary Grant Shapps suggested relaxing the frequency of MOTs. However, opposition parties have said the help on offer from the government to tackle rising living costs was insufficient, with Labour, the SNP and the Liberal Democrats calling for an emergency Budget to give more support to households. Long-term government neglect of the UK’s rural economy has dented rural productivity, stifled growth, and caused disillusionment with the Conservative party, MPs have warned.


The euro is stronger against the dollar and weaker against sterling this morning. Last month, Russian President Vladimir Putin ordered “unfriendly” countries to pay for gas in rubles. As of today, Russian energy giant Gazprom has confirmed it has halted gas exports to Poland and Bulgaria over the countries’ refusal to pay for supplies in roubles. In a statement released this morning, the company said services will not be restored until payments are made in the Russian currency. But Poland’s deputy foreign minister said Warsaw can cope without Gazprom’s gas. Now, Poland wants EU allies to agree new powers making it easier for sanctions-hit Russian assets to be seized and sold, as member states contemplate the vast costs of rebuilding Ukraine after the war. Germany has agreed to deliver anti-aircraft tanks to Ukraine, the German Defense Ministry announced on yesterday, in a move that underscores a major shift in its approach to providing military help to Ukraine.


The dollar is weaker than most major currencies in the early morning trade. US Secretary of State Antony Blinken announced yesterday that he will, in the coming weeks, address a long-awaited national security strategy to deal with the emergence of China as a great power. The administration announced a strategy for the Indo-Pacific in February in which it vowed to commit more diplomatic and security resources to the region to counter what it sees as China’s bid to create a regional sphere of influence. The White House declined to comment on billionaire Elon Musk’s deal on Monday to buy Twitter Inc. but said that President Joe Biden has long been concerned about the power of social media platforms. Shares in Google parent company Alphabet fell more than 5% in after-hours trading, reflecting the growing concern amongst investors of lofty valuations of tech stocks, amid fears of skyrocketing inflation, tighter monetary policy and geopolitical tensions heightened by Russia’s invasion of Ukraine.


European stocks extended three days of declines as investors came to grips with the implications of cuts in gas supplies from Russia and the prospect of faltering growth. The Stoxx 600 Europe Index fell almost 1% while S&P 500 and Nasdaq 100 contracts also gave up early gains in the wake of a technology-led slump that pushed the main US gauge to its lowest level in six weeks Tuesday. The dollar was around the highest level in nearly two years. Treasuries retreated but the 10-year yield, at about 2.77%, remains lower for the week. The euro touched the weakest level versus the greenback since 2017 amid worries that Moscow may choke gas flows to Europe, hurting the region’s growth in the ongoing fallout from Russia’s invasion of Ukraine. Russia cut off supplies to Poland and Bulgaria, making good on a threat to halt flows to nations that refuse to pay for the fuel in rubles. European gas surged as much as 24%. Oil topped $102 a barrel amid the tension.

Main Economic Data/Central Banks/Government (All Times CET)

8:45 a.m.: France April consumer confidence
9:00 a.m.: ECB’s Lane speaks
10:00 a.m.: ECB’s Muller speaks
11:30 a.m.: Germany to sell bonds
4:30 p.m.: EIA oil inventory report
6:00 p.m.: ECB’s Lagarde speaks
6:00 p.m.: Russia March retail sales, unemployment rate, industrial output
Bloomberg Green Summit in New York


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