Morning Report

March 28, 2022

“It has been suggested that Brexit may be restricting Britain’s trade performance – UK goods exports have underperformed the rest of the world, with UK goods exports falling 14% in the three months to January, whilst the global average has increased 8.2% in the same period.”

Sam Cornford, Partner – Head of Trading

Main Headlines

US president Joe Biden has denied that the US is seeking to overturn Vladimir Putin’s regime after appearing to call for the ousting of his Russian counterpart, as European leaders stressed the importance of avoiding an escalation of geopolitical tensions. In a speech in Warsaw on Saturday, Biden condemned Putin’s “brutality” in the invasion of Ukraine, saying: “For God’s sake, this man cannot remain in power”. On his return to Washington the following day, Biden was asked by a reporter if he was calling for regime change. The US president replied: “No.” Earlier, US secretary of state Antony Blinken said that the US had “repeatedly” stated that “we do not have a strategy of regime change in Russia — or anywhere else”. The UK said it was not pushing for regime change and believed Putin should be offered an “off ramp” from the war. “It’s good in principle to incentivise good behaviour, not encourage worse behaviour by suggesting there is nothing left to lose,” said one senior British official.

British pension fund managers are writing off billions of pounds of frozen Russian assets held for their members as they run out of options to sell them safely, adding to the risks to their funding positions from Russia’s invasion of Ukraine. The funds have in many cases marked those assets down in value, after the invasion last month – which Russia calls a “special military operation” – led to rounds of sanctions by Western governments and countermeasures by Russia. British foreign minister Liz Truss says sanctions imposed on Russian individuals and companies could be lifted if Russia withdraws from Ukraine and commits to end aggression. Many pension funds are in deficit after years of ultra-low interest rates curbed gains in their investments. But their funding levels improved during the COVID-19 pandemic, as economic stimulus in response to the virus lifted asset prices. The British government says it has so far imposed sanctions on banks with total assets of £500 bn and oligarchs and family members with a net worth of more than £150 bn.


Sterling is weaker than most major currencies in the early morning trade. Grant Shapps, UK transport secretary, is to tell P&O Ferries to rehire the 800 staff it sacked this month as its plan to replace them with very low-paid workers is doomed because a law will soon ban the practice. Shapps will tell Peter Hebblethwaite, the company’s chief executive, that the legislation, to be outlined this week, will require all ferry companies operating out of UK ports to pay the national minimum wage. UK goods exports have underperformed the rest of the world in what experts said was a sign that Brexit might be limiting the country’s trade performance. The volume of UK goods exports fell 14% in the three months to January compared with the same period in 2020, before the pandemic – in stark contrast to the global average of an 8.2% rise over the same period. It has been reported that the British government could provide another multi-billion-pound package to help shield households from a further jump in energy bills later this year after its latest budget was criticised for not going far enough.


The euro is stronger against sterling and weaker against the dollar this morning. Turkey and other nations must still talk to Russia and avoid ‘burning bridges’ in order to help end the war in Ukraine, Turkey’s presidential spokesman said on Sunday. EU leaders pledged to bulk buy natural gas jointly and review the role of the fuel in setting electricity prices as part of plans to protect European consumers from spiralling energy costs. However, analysts have questioned whether the 27-member bloc is big enough to dictate the international price of gas. The system will be voluntary. The commission will also examine how to reform the electricity market, a key demand of several countries. Electricity prices are generally set by the price of gas, the most expensive fuel needed to meet demand. The US is finalising a plan to supply the EU with up to 15bn additional cubic metres of liquefied natural gas by the end of 2022. The agreement aims to help the EU reduce its dependence on natural gas from Russia, with the bloc racing to curb Russian imports by two-thirds this year.


The dollar is well bid against most major currencies overnight. President Joe Biden has decided against making a major change to US nuclear weapons policy following pressure from European and Asian allies not to undermine their security amid the nuclear threat from Russia and China. Biden this week decided on a declaratory policy that the “fundamental purpose” of nuclear weapons was to deter, or respond to, a nuclear attack on the US or its allies. US allies last year expressed concern following speculation that Biden might declare that the “sole purpose” of nuclear weapons was to prevent or respond to a nuclear attack – with critics arguing that such a change would weaken the extended deterrence that the US provides to allies around the world and embolden Russia. The US has threatened to impose sanctions on individuals and companies outside Russia that are helping it circumvent western penalties imposed due to the war in Ukraine, in what would be a significant escalation of its efforts to financially isolate Moscow.


Sovereign bonds tumbled, while European stocks gained, and US equity futures fell today, as economic risks from inflation and tightening monetary policy hit sentiment. The US 10-year Treasury yield climbed past 2.5%, above a technical trendline that’s served as a ceiling since the late 1980s. Bonds slid from Australia to the UK, while Japan’s 10-year rate extended gains. A key part of the Treasury curve inverted for the first time since 2006, as the yield on the five-year note rose above that on the 30-year bond. The rout suggests fixed-income investors anticipate an economic downturn and perhaps even a recession as the Federal Reserve hikes interest rates. Europe’s Stoxx 600 advanced, while S&P 500 and Nasdaq 100 contracts dipped as investors also monitored Russia’s war in Ukraine. Most Asian shares lost ground. Energy stocks fell with oil as China’s worsening virus resurgence raised concerns about demand in the world’s biggest crude importer. Gold retreated, while Bitcoin turned positive for 2022.

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

8:00 a.m.: Sweden Feb. Trade Balance
8:00 a.m.: Norway Feb. Retail Sales W/ Auto Fuel
9:00 a.m.: Spain Jan. Mortgage Lending, Approvals
9:00 a.m.: Slovakia Feb. PPI
10:00 a.m.: Switzerland Total Sight Deposits
12:00 p.m.: Norges Bank’s Borsum speaks
12:00 p.m.: ECB’s Rehn speaks
12:00 p.m.: Ireland Feb. Retail Sales
1:00 p.m.: BOE’s Bailey speaks
3:40 p.m.: UK Chancellor Sunak testifies


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