March 9, 2022

“Chaos in commodities continues as the United States and its western allies introduced heavy sanctions which are cutting off natural resource-rich Russia from the global economy.”

Tim Hallinan – Trading Director

Main Headlines

The US Congress on Tuesday appeared to be on the cusp of an agreement to allocate billions of dollars in emergency aid for Ukraine, fund the federal government through Sept. 30, and provide resources to fight the COVID-19 pandemic. Sweeping legislation, awaiting final approval from Democratic and Republican congressional leaders, was expected to provide $1.5 trillion for defense and nondefense discretionary spending, as much as $14 billion to help Ukraine respond to Russia’s invasion and about $15 billion for COVID. Schumer’s Republican counterpart, Senate Minority Leader Mitch McConnell, said he expects $14 billion in humanitarian and military aid for Ukraine to include loan guarantees to help NATO allies including Poland purchase US warplanes to replace warplanes transferred to Ukraine. Democrats hoped to use strong public support for helping Ukraine to pressure Republicans into passing the sweeping “omnibus” bill funding the government.

Britain’s ports have criticised ministers for failing to provide a blacklist of ships prevented from docking in the country under a ban introduced as part of sanctions against Russia, leaving operators with the onerous task of trying to identify the vessels. The move was designed to “restrict Russia’s economic interests” and hold the Kremlin to account over the invasion of Ukraine. Port operators have expressed concern that they either fall foul of the government’s ban by letting a ship in that was blacklisted or deny entry to an unconnected vessel and become embroiled in a contractual dispute. Since the ban was announced at the beginning of last week, Chief Executive of the British Port Association, Richard Ballantyne, said no vessel had been turned away by a port but he estimated that as many as a dozen Russian-linked ships bound for the UK had diverted elsewhere.

GBP

Sterling is stronger against the dollar and weaker against euro this morning. British transport minister Grant Shapps said on Wednesday Britain had used new aviation sanctions to impound an aircraft after making it a criminal offence for Russian aircraft to fly or land in the United Kingdom. The measures to strengthen action against Russian aircraft mean it is a criminal offence for any to fly or land in the United Kingdom. Additionally, Britain will phase out imports of Russian oil and oil products by the end of 2022 and consider banning its natural gas, joining other countries like the United States in a move to punish Moscow over the invasion of Ukraine. Britain is set to step up its production of oil and gas. UK home secretary, Priti Patel, faced a barrage of criticism and a call to resign from her own party as concern grows among Tory MPs over the government’s refusal to ease restrictions on Ukrainian refugees.

EUR

Euro is well bid against most major currencies overnight. Russia warned the West on Wednesday that it was working on a broad response to sanctions that would be swift and felt in the West’s most sensitive areas. Russia battered Ukrainian cities on Wednesday as an invasion that has left Moscow increasingly detached from the international economy and spurned by multinational companies entered its third week. International lenders including Citigroup, ING and JPMorgan are reviewing their relationship with telecoms group Veon, after the owner of its largest shareholder and one of Russia’s richest men, Mikhail Fridman, was hit with sanctions by the EU. Swedish PM, Magdalena Andersson, rejected opposition calls to consider joining NATO following Russia’s invasion of Ukraine, saying an application now would destabilize security in Europe.

USD

The dollar is weaker than most major currencies in the early morning trade. The de-facto leaders of Saudi Arabia and the United Arab Emirates have declined to arrange calls with US president Joe Biden in recent weeks as the US and its allies have sought to contain a surge in energy prices caused by Russia’s invasion of Ukraine. The US Senate voted overwhelmingly on Tuesday to provide the long loss-making Postal Service (USPS) with about $50 billion in financial relief over a decade and require its future retirees to enrol in a government health insurance plan. A large majority of Americans supports an end to US imports of Russian energy as a response to Russia’s invasion of Ukraine, despite surging gasoline prices. Twenty-two states urged a US appeals court to uphold new federal rules to reduce vehicle emissions by 28.3% through 2026, after other states and industry participants challenged the planned changes.

Markets

US and European equity futures rose Wednesday as traders took stock of risks from a surge in commodity prices following Russia’s invasion of Ukraine. A retreat in China weighed on Asian shares. European contracts added about 2%, while S&P 500 and Nasdaq 100 futures made more modest gains. MSCI Inc.’s Asia-Pacific index was weighed down by both China and Hong Kong, where a move by the world’s largest sovereign wealth fund to snub an apparel firm stirred investor angst. Crude climbed after the US moved to ban imports of Russian fossil fuels to punish the nation for the war. The UK will prohibit Russian barrels but spare natural gas and coal. West Texas Intermediate oil was near $126 a barrel. Bonds in Australia and New Zealand slid, and Treasuries held losses. The US 10-year yield was at 1.85%. The dollar fluctuated. Gold was near a 19-month peak. The ruble fell about 8% as trading resumed in Moscow.

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

8:00 a.m.: Sweden Jan. industrial orders
9:00 a.m.: Hungary Feb. CPI
10:00 a.m.: Italy Jan. industrial production
10:30 a.m.: Bank of Italy releases monthly stats
11:00 a.m.: Sweden sells bonds
11:15 a.m.: Switzerland sells bonds
11:30 a.m.: Portugal sells bonds
4:30 p.m.: EIA U.S. crude inventory report
Moscow money and repo market trading resumes

Corporate Events

Earnings include Campbell Soup, Thor Industries, United Natural Foods, Korn Ferry, Ebix, WSP Global, LifeWorks

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