February 22, 2022

“Brent crude prices soared to a fresh seven-year high above $97 a barrel and Asian stocks continue dropping as Putin puts Russia on war footing.”

Sam Cornford, Partner – Head of Trading

Main Headlines

President Joe Biden signed an executive order on Monday prohibiting investment in areas of Ukraine that Russian President Vladimir Putin recognises as separatist states. The order came after Mr Putin signed a decree recognising the separatist regions of Donetsk and Luhansk in Ukraine’s east as independent entities. White House press secretary Jen Psaki said that the White House had anticipated such a move and that Mr Biden’s executive order would prohibit new investment, trade, and financing by Americans to, from and in the so-called Donetsk People’s Republic and Luhansk People’s Republic. The order would also prohibit “the importation into the United States, directly or indirectly, of any goods, services, or technology from the Covered Regions,” as well as “the exportation, re-exportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of any goods, services, or technology” to the regions.

All Covid restrictions will end in England on Thursday and free mass testing will stop from 1 April. The prime minister told MPs the legal duty to isolate for those who tested positive would be dropped as he unveiled his “living with Covid” plan. Meanwhile, the British Medical Association, a doctors’ union, said the plan failed to protect those most at risk from Covid. Furthermore, opposition parties said the prime minister’s blueprint out of the pandemic had moved too fast, and voiced concern over the scaling back of free testing. Sir Chris said the public health advice for people with Covid would still be to self-isolate to prevent others catching it, as it would be for many other highly infectious diseases. The UK government’s chief scientific adviser added that the virus would continue to evolve over the next couple of years and argued it was crucial the nation retained a virus surveillance system to monitor new threats and the capacity to “ramp up” measures again quickly to protect the vulnerable.

GBP

Sterling is weaker than most major currencies in the early morning trade. Britain’s biggest private businesses will be expected to match listed companies on gender parity, as ministers launch a fresh push for more women to be appointed to senior leadership positions. Britain’s City minister has said tens of billions of pounds of investment would be unleashed from insurance companies as he released further details of a post-Brexit rewrite of rules governing the sector. The UK’s defence ministry still risks spending more than it can afford on new weapons and equipment because of longstanding issues, including over-optimism about programme costs and its ability to hit cost-saving targets, the parliamentary spending watchdog has warned. The industry regulator Ofwat suggested that Britain’s privatised water companies should link executive pay to performance on a range of measures including sewage pollution. UK business activity expanded at its fastest pace for eight months in February as the Omicron coronavirus wave faded and consumers headed out to spend on travel and leisure.

EUR

Euro is stronger against sterling and weaker against the dollar this morning. Vladimir Putin has ordered troops into eastern Ukraine after recognising two Moscow-backed separatist regions, hobbling the prospects of a diplomatic solution to the crisis as he put his country on a war footing. The Ukrainian military said two soldiers were killed and 12 wounded in shelling by pro-Russian separatists in the east in the past 24 hours, the most casualties this year, as ceasefire violations increased. The United States and its European allies are now poised to announce harsh new sanctions against Russia. Meanwhile, European stocks fell as investors clung to hopes that diplomacy will prevail over an increasingly tense Russia-Ukraine crisis. The losses came midmorning on Monday in Europe after a Kremlin spokesman said no concrete plans for a summit between President Joe Biden and Russian President Vladimir Putin had been made, following weekend efforts by French President Emmanuel Macron to broker discussions to avert conflict in Europe.

USD

The dollar is well bid against most major currencies overnight. There could be a knock-on impact to energy prices paid by American consumers from ongoing tensions between Russia and Ukraine, US Vice-President Kamala Harris said, adding that the US government is working to mitigate the effects. Kamala Harris said the United States is taking “specific and appropriate steps” to prepare for any potential costs. Donald Trump’s return to social media after being banned from several platforms last year is off to a bumpy start: the former president’s new social media venture, Truth Social, launched on Apple’s App Store on Sunday, rife with errors, malfunctions, and looming questions. A “major winter storm” is set to unfold across some northern tier states in the US in the next 24 hours, with temperatures in some places dropping up to 30 degrees below average, forecasters have warned. There is a risk of excessive rainfall and severe thunderstorms from the southern plains to Tennessee and the Ohio Valley from Monday into Wednesday, the National Weather Service said.

Markets

Stocks slid Tuesday on intensifying tension between the West and Russia over Ukraine, a standoff that’s causing energy prices to soar and leading investors to seek the safety of sovereign bonds and bullion. Russian shares tumbled some 8%, while an Asia-Pacific equity gauge fell toward its lowest level this month. Russia-based aluminium producer United Co. Rusal International PJSC sank the most since 2018 in Hong Kong. European equity futures shed more than 1.5%. US contracts pointed to a lower Wall Street open when trading resumes after a holiday. Treasuries climbed, taking the US 10-year yield below 1.90%. The dollar was steady and gold, the traditional haven during upheavals, held gains. Oil, nickel, and aluminium jumped as traders weighed the risk of supply disruptions from potential Western sanctions. European gas surged over 10%. Western leaders condemned Russia’s latest moves and the US prepared to announce new sanctions against Russia. The US has warned of a possible Russian invasion of Ukraine, a claim the Kremlin has repeatedly rejected.

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

10:00 a.m.: Germany Feb. Ifo business climate, current assessment
10:00 a.m.: Italy Jan. CPI
11:15 a.m.: Austria to sell bonds
11:45 a.m.: BOE’s Dave Ramsden speaks
12:00 p.m.: Ireland Jan. PPI
2:00 p.m.: Hungary central bank rate decision
2:00 p.m.: Norges Bank Governor Olsen speaks
3:00 p.m.: Belgium Feb. business confidence
International Energy Week kicks off
Argus Oil Forum in London

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