Morning Report

March 11, 2022

“The campaign to cut Russia off from technology services is the first modern technological isolation seen of this magnitude – fuelling concerns that Russia will lean further into its relationship with China.”

Tim Hallinan – Trading Director

Main Headlines

The campaign to starve Russia of technology — stripping the nation of everything from iPhones and Airbnb listings to defense electronics — is an unprecedented experiment that risks pushing Vladimir Putin further into China’s orbit. Using export controls as a tool, the US is leading an effort to deprive Russia of components it needs for high-end industry and advanced weapons, with the hopes of ensuring that President Putin feels the pain of his decision to invade Ukraine. That has forced makers of computers, chips and sensors to halt shipments to Russia. At the same time, many of the biggest US companies have gone further, effectively establishing a tech boycott of the nation. The idea, encouraged by Ukrainian leaders, is that depriving Russians of access to tech and digital platforms will spur popular protest and undermine Putin’s military campaign.

The UK economy bounced back quickly in January from the damage caused by the Omicron coronavirus outbreak, with a swift recovery in the services sector driving growth. Gross domestic product increased 0.8 per cent on the previous month, faster than analysts had expected, after shrinking 0.2 per cent in December. The figures confirm that the spread of the Omicron variant dealt only a brief setback to the UK’s recovery, but economists warn that the outlook for growth is darkening, as the war in Ukraine fuels inflation, eating into household incomes, and threatens further disruption to supply chains. Yael Selfin, chief economist at KPMG, said growth momentum was “likely to be derailed” by the conflict.


Sterling is stronger against the euro and weaker against the dollar this morning. Britain imposed sanctions on Chelsea football club owner Roman Abramovich and Igor Sechin, chief executive of Russian oil giant Rosneft, hitting them with asset freezes and travel bans because of their links to Russian President Vladimir Putin. The two billionaires plus Oleg Deripaska and four other Russian oligarchs are the most high-profile tycoons to be added to the British sanctions list since Russia invaded Ukraine. The move follows criticism that Britain has been acting too slowly. The action puts on ice Abramovich’s plans to sell Premier League club Chelsea, effectively placing the current European champions under government control. The team can carry on playing but the government said it was open to selling the club so long as Abramovich himself did not benefit.


The euro is weaker than most major currencies in the early morning trade. European markets are reacting this morning to news emerging that Western nations are set to ramp up sanctions on Russia for its invasion of Ukraine by revoking its “most favoured nation” trade status. The move, not yet official, paves the way to slap tariffs on a wide range of Russian goods. In anticipation of tighter monetary policy from central banks, stocks in Europe struggled for direction, after days of choppy trading. The Stoxx 600 share index, which is on track for a weekly gain but is down more than a tenth for the year so far, moved between small gains and losses in early trades. This was exacerbated by the European Central Bank’s announcement that it would reduce its bond-buying scheme earlier than initially planned, causing a broad sell-off of eurozone government debt.


The dollar is well bid against most major currencies overnight. It hit a new five-year top on the yen on Friday after a strong US inflation report, while the euro struggled to hold its own as a hawkish turn from the European Central Bank was offset by growth risks emanating from the Ukraine crisis. The greenback rose as high as 116.55 yen in early trade, its highest level since January 2017, and it is up 1.5% on the yen this week, its biggest weekly gain since October. However, US consumer prices surged in February, forcing Americans to dig deeper to pay for rent, food and gasoline, and inflation is poised to accelerate even further as Russia’s war against Ukraine drives up the costs of crude oil and other commodities. The broad rise in prices reported by the Labor Department yesterday led to the largest annual increase in inflation in 40 years. Inflation is nearly four times the US central bank’s 2% target.


US stock-index futures and European equities fluctuated as a worsening war in Ukraine and central banks’ inflation-taming plans raised the prospect of a plunge in global growth. June contracts on the S&P 500 and Nasdaq 100 indexes slipped at least 0.2% each in a volatile session. Treasuries and the dollar advanced amid continued nervousness over commodity-price spikes. Oil rebounded and the ruble extended its recovery. Sporadic gains in the equity market are getting wiped out quickly, with the Ukraine conflict boosting inflation and threatening to curb global growth. Trading in Asia reflected overnight losses in the US market. An MSCI Inc. gauge of the region’s stocks capped its fourth consecutive weekly decline.

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

8:00 a.m.: U.K. Jan. GDP, trade balance, industrial production
8:00 a.m.: Germany Feb. CPI
8:00 a.m.: Turkey Jan. current account balance, industrial production
9:00 a.m.: Spain Feb. CPI
9:00 a.m.: ECB’s Rehn speaks
10:30 a.m.: BOE/Kantar March. inflation expectations
11:00 a.m.: ECB’s Centeno speaks
2:00 p.m.: Ukraine 4Q GDP
4:00 p.m. US March University of Michigan consumer sentiment
7:00 p.m.: Baker Hughes US rig count


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