Morning Report

February 28, 2022

“The rouble tumbled to record lows, prompting Russian authorities to tell export-focussed companies to sell foreign currency, as the Russian central bank raises its key interest rate from 9.5% to 20%.”

Sam Cornford, Partner – Head of Trading

Main Headlines

Investors are bracing for turmoil in the market for mortgage loans backed by the government as the Federal Reserve begins to sketch out its plans to shrink its $9tn balance sheet. A debate is under way about how the US central bank will go about reducing its enormous stock of Treasuries and agency mortgage-backed securities. These were amassed over the past two years as the Fed sought to quell financial panic stemming from the pandemic and shield the world’s largest economy from one of the worst contractions in history. The Fed has pledged to reduce its holdings of both Treasuries and MBS, and to move towards a smaller all-Treasury portfolio in a “predictable manner” but has yet to divulge any details about the timing and pace of a reduction. According to data, a hot housing market last year, driven by low interest rates and high savings, pushed issuance of mortgage-backed securities to an all-time high of about $4tn with a net supply of about $900bn.

Downing Street is set to bring forward legislation designed to crack down on the flow of “dirty money” into the UK in a fresh rebuke to Russian president Vladimir Putin for his invasion of Ukraine. Number 10 will put forward a new “economic crime bill” that will introduce a register of overseas entities highlighting the ultimate owners of overseas companies that control property and land in the UK. The long-awaited measure was first proposed several years ago in order to tackle the £100bn of illicit financing that the National Crime Agency estimates is channelled through the UK each year. The new register will require anonymous foreign owners of UK property to reveal their identities to ensure that criminals cannot hide behind secretive chains of shell companies. Those who did not declare their beneficial owner would face restrictions over selling their property and up to five years in prison. The bill will also include measures to strengthen the system of “unexplained wealth orders.”


Sterling is stronger against euro and weaker against the dollar this morning. Labour has branded changes to new immigration rules brought in to help Ukrainians seeking refuge in the UK as “shameful”, as Boris Johnson pledged further arms support for the country. British MPs have demanded that the government makes it easier for UK residents to bring family members fleeing Russia’s invasion of Ukraine to join them in Britain. Staff surveillance is at risk of “spinning out of control” Britain’s largest federation of trade unions has warned, adding to concerns that the UK has fallen behind its EU counterparts in this area of workers’ rights. A survey found that British businesses have become sceptical that the government and EU will resolve problems at the UK border and instead believe it will fall to them to reduce costly delays. Boris Johnson’s government has shelved a strategic plan to create a British rival to Silicon Valley around Oxford and Cambridge in order to prioritise “levelling up” spending in the north of England.


Euro is weaker than most major currencies in the early morning trade. Over the weekend, France, Germany, and other nations that had so far insisted on sending only non-lethal aid to Ukraine U-turned and said they would also send weapons. Last night, another Rubicon was crossed when EU foreign affairs ministers approved allocating €450mn from the bloc’s budget for arming Ukraine, for the first time ever. European stock futures tumbled, and oil prices rose after Russian president Vladimir Putin put his country’s nuclear forces on high alert and the west levied its toughest sanctions yet following Moscow’s invasion of Ukraine. Meanwhile, Russia’s central bank on Monday sharply raised its key policy rate to 20%, a day after announcing a slew of measures to support domestic markets, as it scrambled to manage the fallout of harsh Western sanctions in retaliation against Moscow’s invasion of Ukraine. Norway’s Equinor has decided to stop new investments in Russia and start exiting from joint ventures because of Russia’s invasion of Ukraine.


The dollar is well bid against most major currencies overnight. The Biden administration on Sunday condemned Vladimir Putin’s decision to place Russia’s nuclear deterrence forces on high alert. The White House also faced growing calls from senior Republicans to target Russia’s energy sector with new sanctions. The US’s biggest offshore wind lease sale attracted record bids of more than $4bn, outstripping any oil and gas auction in American waters, as renewable energy developers compete to secure a prime location to install turbines. The federal government auction of 488,000 acres in the Atlantic Ocean near New York and New Jersey drew in high bids totalling $4.37bn after a three-day auction process ending on Friday, according to the Bureau of Ocean Energy Management. An inflation gauge jumped 6.1% in January compared with a year ago, the latest evidence that Americans are enduring sharp price increases that will likely worsen after Russia’s invasion of Ukraine.


Equity futures slid Monday, sovereign bonds rallied and commodities including oil surged amid heightened uncertainty after Western nations escalated sanctions on Russia for the invasion of Ukraine. European contracts fell some 3%, while those for the Nasdaq 100 and S&P 500 shed about 2%. Oil, natural gas, wheat, and palladium jumped, with Brent crude again soaring above $100 a barrel on fears of commodity-supply disruptions. Rallies in a dollar gauge, gold and Treasuries underlined the demand for havens. The euro fell on worries about risks for Europe’s economy, which relies on Russian energy. Doubts are now growing about the Bank of Russia’s ability to backstop Russia’s financial system. The nation hiked interest rates to 20% from 9.5%, mandated sales of foreign-currency revenue by exporters and temporarily banned non-residents from selling securities. The ruble fell 8% at the open in Moscow. The escalating Ukraine conflict and more severe Western sanctions are roiling markets.

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

8:00 a.m.: Denmark 4Q GDP
8:00 a.m.: Finland Dec. trade balance
8:00 a.m.: Sweden 4Q GDP; Jan. trade, retail sales
8:00 a.m.: Norway Jan. credit indicator growth
9:00 a.m.: Switzerland 4Q GDP
9:00 a.m.: Spain Feb. CPI
10:00 a.m.: Norges Bank March daily FX purchases
10:00 a.m.: Spain Dec. current account
10:30 a.m.: Portugal Feb. CPI
11:00 a.m.: Macron holds defense and national security council
12:00 p.m.: Portugal 4Q GDP
12:30 p.m.: ECB’s Panetta speaks
2:50 p.m.: France sells bonds
4:50 p.m.: ECB’s Christine Lagarde speaks
5:15 p.m.: Biden speaks with allies about Ukraine conflict
EIA releases Petroleum Supply Monthly

Corporate Events

Earnings include Zoom, Workday, Lucid, HP Inc., SBA, Erste Group


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