Morning Report

February 15, 2022

“Another surge in payrolls and a surprise beat on wage growth both suggest the labour market continues to tighten, further signs the UK economy is evolving broadly in line with forecasts. A third rate hike from the Band of England in March is widely expected.”

Sam Cornford, Partner – Head of Trading

Main Headlines

The US damped hopes that Moscow wanted to find a diplomatic route out of the Ukraine crisis as officials warned that Russia’s military had in the past two days continued to ramp up plans for an invasion of its neighbour. Russia’s foreign minister, Sergei Lavrov, raised expectations on Monday that the stand-off might be resolved peacefully when he said Moscow was prepared to keep talking to the west about its security concerns and that there could still be a “way forward” in negotiations. But officials in Washington said Lavrov’s comments, which were made in a televised meeting with Vladimir Putin, Russia’s president, were at odds with advancing military preparations for an assault. Meanwhile, the US continues to prepare for a possible invasion, saying it would temporarily shift its embassy in Ukraine from Kyiv to Lviv, in the west of the country, “due to the dramatic acceleration in the build-up of Russian forces.” Antony Blinken, US secretary of state, said late on Monday that Washington would boost its financial assistance to Ukraine by offering a “sovereign loan guarantee of up to $1bn.” Biden also held a call with Boris Johnson, Britain’s prime minister, to discuss diplomatic efforts and an allied response to a possible invasion.

UK housing secretary, Michael Gove, has set out new measures that include targeting companies that manufactured defective cladding, which could see them picking up a large portion of the £9bn bill to resolve the long-running building-safety crisis in England. As of yesterday, Gove put forward a series of proposals that would force cladding companies and housebuilders to pick up the tab for historical defects, putting substance on the hard-line rhetoric he has used towards the industry in recent weeks and crystallising a pledge to protect leaseholders from the costs of the crisis. Among the proposals is a rule enabling building owners and landlords to take legal action against manufacturers that supplied defective materials for any home built in the past 30 years that has since been declared unfit to live in. That would potentially put cladding companies on the hook for the cost of any repairs linked to their materials, even where those have already been paid for by the landlord or leaseholders. Gove has also proposed expanding the powers of a new product regulator. The proposals would legally protect leaseholders in any building higher than 11m, the ones deemed at the highest risk of a deadly fire, from paying anything towards remedial work.


Sterling is stronger against the dollar and weaker against euro this morning. Sadiq Khan, the mayor of London, has unveiled the biggest rise in public transport fares in the UK capital in a decade in an effort to rebuild the London transport authority’s shattered finances. Fares on Transport for London services, including the Tube and buses, will rise by 4.8 per cent from March 1, the mayor’s office announced on Monday. The increase comes amid an escalating cost of living crisis in the capital and followed petrol prices hitting record levels on Monday and ahead of looming rises to rail fares across the UK. Almost £1.4bn of cheap debt issued by the Bank of England to secure the survival of some of the UK’s larger companies during the coronavirus pandemic is still to be repaid before the scheme closes next month. According to the BoE data, nine companies, including London Gatwick airport, whose French majority owner Vinci more than doubled its dividend last year to €1.5bn, are still using the Covid Corporate Financing Facility. Labour leader Sir Keir Starmer said on Monday he had received death threats following Boris Johnson’s claim that during his time as director of public prosecutions he had failed to prosecute paedophile Jimmy Savile.


Euro is well bid against most major currencies overnight. Ukraine President Volodymyr Zelenskiy called on the country’s people to fly flags and sing the national anthem in unison on February 16, a date that some Western media say Russia could invade. Russia’s parliament will vote today to decide whether to ask President Vladimir Putin to recognise two Russian-backed breakaway regions in eastern Ukraine as independent, the speaker of the Duma lower house said. Meanwhile, German Chancellor Olaf Scholz heads to Moscow today to meet President Vladimir Putin in a high stakes mission to avert war. The European Central Bank will raise its deposit rate in the second half of this year, and not wait until 2023 as previously expected, according to a poll of economists who also sharply upgraded their inflation forecasts for this year. Airlines and the leasing companies that control billions of dollars’ worth of passenger jets are drawing up contingency plans for a freeze in business with Russia if the standoff on Ukraine’s border boils over into a military conflict.


The dollar is weaker than most major currencies in the early morning trade. Canadian Prime Minister Justin Trudeau on Monday invoked rarely used emergency powers to bring an end to trucker-led protests against Covid health rules, after police arrested 11 people with a “cache of firearms” blocking a border crossing with the United States. Experts say the pandemic economic recovery created strong US demand for essential and migrant labour. The relative weakness of economies south of the border also meant migrants tried to send more, they added. Remittances to Mexico grew 27 per cent to more than $51bn, according to data from the World Bank. Guatemalan migrants sent 35 per cent more, while payments grew 26 per cent in Honduras and El Salvador. Donald Trump’s long-time accountancy firm cut ties with his business last week, saying that nearly a decade’s worth of Trump’s filings should “no longer be relied upon.” The move comes amid ongoing criminal and civil investigations into whether Trump illegally inflated the value of his assets.


Asian stocks slipped Tuesday as traders parsed geopolitical risks and worries about Federal Reserve policy tightening. Chinese shares outperformed on central bank steps to support economic growth. MSCI Inc.’s Asia-Pacific share gauge fell for a third session, though China bucked the trend after its monetary authority undertook a cash injection to support expansion. European futures retreated, while S&P 500 and Nasdaq 100 contracts swung between gains and losses. Treasury yields edged down amid a flatter curve signalling concerns that looming Fed interest-rate hikes could choke economic growth. The ebb and flow of haven demand due to the Russia-Ukraine standoff has also whipsawed bonds lately. The tension in Europe is still keeping oil markets on edge. West Texas Intermediate crude inched lower but remained around $95 a barrel after earlier scaling that mark for the first time since 2014. Meanwhile, Fed officials came out with another round of views on the policy outlook. Fed Bank of St. Louis President James Bullard said the monetary authority needs to move forward its plans to raise rates to underline its inflation-fighting credibility.

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

8:00 a.m.: U.K. Jan. jobless claims; Dec. weekly earnings, unemployment rate
8:00 a.m.: Riksbank’s Floden on panel
9:00 a.m.: Spain Jan. CPI
9:30 a.m.: Netherlands 4Q GDP, Dec. consumer spending
11:00 a.m.: Euro area 4Q GDP
11:00 a.m.: Germany Feb. ZEW survey
6.30 p.m.: ECB’s Villeroy speaks
ermany’s Scholz holds talks with Putin
World Bank launches its annual World Development Report
Jailed Russian opposition leader Alexey Navalny goes on trial
Singapore Airshow

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