Morning Report

March 3, 2022

“Boycotts of Russian suppliers have hit natural gas, with European prices settling more than 40 per cent higher at €173 a megawatt hour, amid indications that Russian forces had seized the city of Kherson in southern Ukraine.”

Tim Hallinan – Trading Director

Main Headlines

Earlier this week, the US accused Putin of taking a dangerous step when Russia’s leader responded to the imposition of western sanctions by raising the alert of Moscow’s nuclear forces. Seeking to avoid escalating nuclear tensions with Russia, the Biden Administration on Wednesday postponed a long-planned military test launch of an intercontinental ballistic missile. The decision was a direct response to Russian President Vladimir Putin publicly directing Russia’s nuclear forces to go on a high alert status following his Feb. 24 invasion of neighbouring Ukraine, US officials said. Lloyd Austin, the US defence secretary, ordered the delay of a long-planned test of a Minuteman III ICBM to demonstrate that the American military had “no intention in engaging in any actions that can be misunderstood or misconstrued.” According to the Federation of American Scientists, Russia has just under 4,500 nuclear weapons, compared to the US, which has more than 3,700.

UK cabinet minister, Michael Gove, is drawing up plans to seize British property owned by Russian oligarchs with links to President Vladimir Putin, without paying them compensation. Ukrainians fleeing their homeland could be housed in the lavish UK residences of oligarchs hit with sanctions under the proposals discussed by Mr Gove, the levelling-up secretary, and other ministers, according to government insiders. British Prime Minister Boris Johnson, who was accused by Labour on Wednesday of failing to take sufficient action against Mr Putin’s allies following his invasion of Ukraine, is said to be supportive of Mr Gove’s plans to seize the land and property of sanctioned oligarchs. The proposals are likely to require legislation, and government lawyers have concerns that the plans would be subject to legal challenges because they would undermine UK property rights. No final government decision has yet been reached on whether to proceed.


Sterling is stronger against the dollar and weaker against euro this morning. British Land said it was planning to axe its rental contract with Gazprom’s global trading arm based in central London as a growing number of businesses seek to cut ties with the Russian state energy company over the war in Ukraine. Rishi Sunak is planning an overhaul of the UK government’s “flagship industrial policy”, as he looks to redesign a misfiring £7.7bn R&D tax credit system to boost sluggish business investment. The chancellor believes that in spite of spending “huge and rapidly growing sums” on the tax credit, it is not doing enough to boost growth. Everton football club has suspended its sponsorships with Russian companies connected to Uzbekistan-born Russian billionaire Alisher Usmanov, who was hit by EU sanctions this week. Last month’s rise of the Nationwide House Price Index was the biggest since June last year and up from the 11.2 per cent jump in January.


Euro is weaker than most major currencies in the early morning trade. Russia has captured its first major city in Ukraine after a week of fighting, with Kherson, a regional capital of 300,000 people on the Black Sea, now under the control of Putin’s forces. Igor Kolykhaiev, the city’s mayor, said in an update around 1 am that ‘armed visitors’ had stormed a council meeting and imposed new rules including a strict curfew and urged citizens to follow them. Oil shot to its highest level in more than nine years and wheat prices climbed above $11 a bushel for the first time since 2008, amid indications that Russian forces had seized the city of Kherson in Ukraine. The eurozone’s inflation rate soared to a new high in February, presenting the ECB with a difficult choice between supporting flagging growth and clamping down on accelerating prices driven by the threat to energy supplies.


The dollar is well bid against most major currencies overnight. President Joe Biden visited the battleground state of Wisconsin and reiterated his support for the Ukrainian people while touting the billions of dollars in public infrastructure investments he helped secure at home. The Federal Reserve is prepared to push ahead with a “series” of interest rate increases from March, despite a highly uncertain economic outlook as a result of Russia’s invasion of Ukraine, Jay Powell told US lawmakers on Wednesday. Powell confirmed his support for a quarter-point rate rise at the central bank’s March meeting as he laid out the case for tightening monetary policy amid heightened geopolitical tensions. Progressive challenger Jessica Cisneros has forced incumbent Democratic congressman Henry Cuellar into a run-off in a closely watched congressional primary election in Texas that signals a tough path for Democrats heading into November’s US midterm elections.


Stocks rose Thursday as oil soared to the highest level since 2008 amid the war in Ukraine. Mining and energy stocks led an advance in Europe’s Stoxx 600 Index as commodity prices surged. US futures were little changed after reassuring comments on monetary policy tightening from Fed Chair Jerome Powell. The sanctions imposed on Russia for the invasion have caused traders to shun its resources, stoking fears of shortfalls in energy, grains, and metals. Powell in testimony to US lawmakers backed a measured Fed interest-rate lift off and vigilance on inflation, while indicating the world’s biggest economy can weather higher borrowing costs. An increase in safe-haven goods demand, triggered by the war, has moderated. Treasuries were little changed after sharp losses and the US 10-year yield remains below the 2% levels seen before Russia’s action. The dollar ticked up, while gold was little changed. Meanwhile, monetary authorities appear intent on pushing ahead with tighter policy.

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

7:00 a.m.: Russia Feb. Markit Services, Composite PMI
8:00 a.m.: Turkey Feb. CPI
9:10 a.m.: Riksbank’s Skingsley speaks
9:15 a.m.: Spain Feb. Markit Services, Composite PMI
9:30 a.m.: Hungary One-Week Deposit Rate
9:45 a.m.: Italy Feb. Markit Services, Composite PMI
9:50 a.m.: France Feb. Markit Services, Composite PMI
9:55 a.m.: Germany Feb. Markit Services, Composite PMI
10:00 a.m.: Norway Sovereign Wealth Fund’s annual report
10:00 a.m.: Euro area Feb. Markit Services, Composite PMI
10:00 a.m.: Italy Jan. Unemployment Rate
10:30 a.m.: U.K. Feb. Markit/CIPS Services, Composite PMI
11:00 a.m.: Euro area Jan. PPI
11:00 a.m.: Euro area Jan. unemployment rate
1:00 p.m.: Ukraine rate decision
1:30 p.m.: ECB publishes account of February 2022 meeting
2:00 p.m.: Russia Gold and FX Reserves
Ukraine and Russia hold talks.

Corporate Events

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