Morning Report

March 29, 2022

“The markets showed signs of relief and boosted sentiment, after peace talks between Moscow and Kyiv showed the first signs of progress. The ruble strengthened against the dollar for a seventh day – its longest streak in almost a year.”

Tim Hallinan – Trading Director

Main Headlines

US President Joe Biden on Monday submitted a $5.79 trillion budget plan to Congress that calls for record peacetime military spending and further aid for Ukraine, while raising taxes for billionaires and companies and lowering government deficits. The budget proposal for the fiscal year starting October 1st, lays out Biden’s priorities, including campaign promises to make companies and the wealthy pay more tax. However, this only represents a ‘wish list’, as lawmakers on Capitol Hill will ultimately make final decisions on budget matters. Biden has insisted that his comments on the weekend that Vladimir Putin “cannot remain in power” were merely an expression of “moral outrage”, and not “articulating a policy change.” The US has warned Russian oligarchs and businesses that it is monitoring their financial transactions for any signs of evasion of Ukraine war-related sanctions as well as tracking those offering them “material support”. As such, the US has been tracking many individuals who are not yet subject to sanctions.

Britons face a “historic shock” to their incomes this year, sparked by surging energy prices, that will hit UK economic growth and consumer demand, Bank of England governor Andrew Bailey has warned. Bailey said Russia’s invasion of Ukraine would fuel the UK cost of living crunch, adding that the energy price shock in 2022 would be larger than during any single year in the 1970s. Surging energy prices are a key factor behind UK consumer price inflation reaching a 30-year high of 6.2% in February, more than three times the BoE’s 2% target. Chancellor Sunak cut fuel duty and promised lower income tax last week, but he has been under fire since then, as his plans have been unable to help the poorest households. With limited support from the government to address the cost-of-living crisis, households are aware that more fiscal pain will be coming when energy prices leap by as much as 50% over the next weeks.


Sterling is stronger against the dollar and weaker against the euro this morning. Rishi Sunak has admitted that the UK’s dismal recent trade performance, compared to other G7 countries, “might well be” because of Brexit. The chancellor, who supported Britain’s exit from the EU, also told MPs yesterday he knew in advance that Brexit would affect trade, although such admissions by Leave campaigners were rare at the time of the 2016 referendum. His comments were a rare recognition from the chancellor that his own political choice in 2016 was contributing to Britain’s economic problems. Britain will strengthen economic pressure on Russia, Prime Minister Boris Johnson told Ukrainian President Volodymyr Zelensky in a call ahead of peace talks over Russia’s invasion of Ukraine. The Metropolitan Police will issue at least 15 fixed-penalty fines initially and could start today, Westminster sources suggest. For months, Prime Minister Boris Johnson and his government were dogged by reports of staff parties in Downing Street when Covid restrictions were in place.


The euro is well bid against most major currencies overnight. Russia is no longer demanding that Ukraine be ‘denazified’ in ceasefire talks and will allow Kyiv to join the EU if it abandons NATO aspirations. Moscow & Kyiv will discuss a pause in hostilities at talks in Turkey today, and draft documents do not contain three of Russia’s initial core demands — “denazification”, “demilitarisation”, and legal protection for Russian language in Ukraine. Ukrainian President Volodymyr Zelensky once again urged Western nations to toughen sanctions quickly against Russia, including an oil embargo, to stop Moscow having a free hand to escalate its measures against his country. In his nightly video address to Ukrainians, a clearly irritated Zelensky said the West had miscalculated last year in delaying sanctions and the invasion had followed. It has been reported that Roman Abramovich, the Russian owner of Chelsea Football Club, and two Ukrainian officials suffered poisoning symptoms in Kyiv in early March after peace talks with Russia.


The dollar is weaker than most major currencies in the early morning trade. The United States and the EU last week announced a landmark deal to wean Europe off Russian natural gas. The “revolutionary” pact, Joe Biden said, would strip Vladimir Putin of the ability to “coerce and manipulate” the continent’s energy consumers. Europe will work “towards securing” a larger market for American gas by 2030. U.S. Secretary of State Antony Blinken will meet the de facto ruler of the United Arab Emirates in Morocco today, in a bid to ease disagreements over oil, Iran and the Ukraine crisis. Unusually for a Middle East tour, the U.S. secretary of state did not stop in Gulf monarchies, that are among Washington’s longest-standing partners. However, the United States says it remains deeply invested in the region, even though its long-term focus is on China and its attention now is on the Ukraine crisis. Companies throughout the US are broadening pay rises as inflation gallops on the quickest tempo in 40 years.


U.S. stocks climbed in afternoon trading in a rally underpinned by gains in mega caps and tech shares. Benchmark Treasuries reversed an earlier slide, while oil tumbled as China’s worsening virus resurgence boosted concern over demand in the world’s biggest crude importer. The S&P 500 rose for a third day, closing up 0.7% after falling as much as 0.6%. The tech-heavy Nasdaq 100 jumped 1.6%. Both indexes settled just off session highs. Equity markets remained sensitive to headlines on the war in Ukraine, dipping earlier after several peace negotiators suffered symptoms of suspected poisoning after a meeting in Kyiv earlier this month. The 10-year Treasury yield traded near 2.45%, from a session high of 2.55%. Earlier yields on five-year Treasuries rose above those on 30-year bonds, suggesting some investors expect an economic downturn. Apple Inc. extended its rally to a 10th day, the longest run since 2010, clawing back losses earlier in the day sparked by a report that it is cutting production of its iPhone SE line. Crypto stocks gained as Bitcoin erased it 2022 losses.

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

8:00 a.m.: Germany Feb. Import Price Index; April GfK consumer confidence
8:45 a.m.: France March consumer confidence
10:00 a.m.: Austria March manufacturing PMIs
10:30 a.m.: U.K. Feb. mortgage approvals
1:00 p.m.: BOE publishes quarterly bulletin
3:00 p.m.: U.S. Jan. FHFA House Price Index
4:00 p.m.: U.S. March Conference Board consumer confidence
4:45 p.m.: Fed’s Harker speaks
Cesco-CRU copper conference

Corporate Events

Earnings include Porsche, Chewy, PVH, Micron Technology, Lululemon, RH, Aroundtown


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