Closing summary
It’s been another day of wild market moves, mainly in commodity markets.
Fears that Russia’s invasion of Ukraine and wider sanctions imposed by the west could affect supplies from both countries have driven oil and gas prices sharply higher, and have also driven up other commodities such as wheat and corn, and metals. Wheat hit a 14-year peak while aluminium reached a new record high of $3,597 a tonne.
Oil prices jumped to near eight-year highs. Brent crude, the global oil benchmark, rose as high as $113.94 a barrel, the highest since June 2014, and has been trading around $111 for most of the day. It has pared some of the gains since then while US light crude is 2.6% higher at $106.1. Brent has gained some 40% so far this year.
ED&F Man Capital Markets analyst Edward Meir told Reuters:
Oil has been pushing higher on growing perceptions that Russian oil is unable to be ‘transacted’. Although oil is not technically under sanction, traders are understandably nervous about taking delivery of Russian crude, let alone storing, shipping, and ultimately selling it.
Natural gas prices have also soared, with the Dutch April gas contract hitting a new record high of €185 per megawatt hour, and is currently trading 41% higher at €171.19 per megawatt hour. British wholesale gas is 35% higher at 390.79p per therm after touching 398.05p per therm, close to the record of 450p seen last December.
European coal prices for 2023 rose to a record $260.5 a tonne on fears of shortages in Europe, heavily relies on on Russia for its coal and gas.
The Russian steel producer Severstal said it had suspended supplies to the EU due to sanctions on its shareholders.
The average cost of a litre of petrol at UK forecourts was at a fresh high of 151.67p on Tuesday, up from 151.16p on Monday, according to the data firm Experian Catalist. The average cost of a litre of diesel is also at a record high, reaching 155.23p.
RAC’s fuel spokesperson, Simon Williams, said: “If oil does stay at this level, the journey to an average unleaded price of 155p may be far too quick.”
Wheat prices reached hit $10.59 a bushel, the highest since March 2008. Corn prices rose to the highest since December 2012.
On the stock markets, the FTSE 100 index index has closed 99 points higher at 7,429.56, a 1.4% gain. Germany’s Dax has finished the day 95 points higher at 14,000, a 0.7% rise, while France’s CAC rose 1.6% to 6,498 and Italy’s FTSE MiB gained 0.7% to 24,534.
The Moscow stock exchange was closed for a third day, but the Russian rouble plunged to a new record low of 110 per dollar in Moscow (outside Russia, it hit a record low of 120 per dollar on the EBS electronic trading platform on Monday).
Here are some of our main stories:
A cargo of oil from Russia is en route to a British port where it is scheduled to arrive on Wednesday evening, due to a loophole in the ban imposed this week by the government in response to Vladimir Putin’s invasion of Ukraine.
The Department for Transport said on Tuesday it had implemented a ban closing British ports to all ships that are Russian-owned, operated, controlled, chartered, registered or flagged. However, the department has confirmed that the prohibition does not cover the origin of the cargo.
Roman Abramovich has put Chelsea up for sale and the Swiss billionaire Hansjörg Wyss has said he is part of a consortium interested in buying the club.
Thank you for reading. We’ll be back tomorrow. Bye! – JK
Updated
DfT: Russia can still send oil and gas to UK despite port ban
In case you were wondering: Russia can still send oil and gas to Britain despite a ban on Russian vessels docking at British ports, according to the Department for Transport. This is because prohibition on Russian ships doesn’t cover the origin of the cargo.
Yesterday the UK passed a law that banned all ships that have any connection to Russia from entering its ports following Russia’s invasion of Ukraine. This applies to all ships that are Russian owned, operated, controlled, chartered, registered or flagged.
However, the DfT said the sanctions were focused on the vessel, not its cargo. This means that ships registered with other countries can still transport Russian oil or liquefied natural gas to Britain.
Updated
On Wall Street, US stocks have opened higher, no doubt boosted by Fed chair Jerome Powell’s comments on interet rate hikes. The Dow Jones and S&P 500 have just extended gains to 1%.
Over here, the FTSE 100, the French and the Italian bourses are all more than 1% ahead while the German market is unchanged.
Updated
Airbus has joined Boeing in halting the supply of aircraft parts and services to Russian airlines, squeezing its aviation industry in the wake of the invasion of Ukraine, reports our transport correspondent Gwyn Topham.
The European aerospace giant said today it was suspending support and delivery of spare parts, in line with international sanctions.
Boeing stopped work with Russian airlines on Tuesday night after President Biden announced further sanctions on Moscow, including following Britain and the EU in banning Russian planes from its airspace.
The Seattle-based manufacturer said:
We have suspended major operations in Moscow and temporarily closed our office in Kyiv. We are also suspending parts, maintenance and technical support services for Russian airlines. As the conflict continues, our teams are focused on ensuring the safety of our teammates in the region.
Both manufacturers were unwilling to predict how it would affect Russian aviation in the short and medium term. Around two thirds of the total Russian fleet are either Boeing or Airbus made - some 332 by Boeing and 304 Airbus aircraft – and while maintenance and repair of all aircraft in service is routine and ongoing, the impact is unlikely to be immediate unless critical parts fail.
Opec+ sticks to modest output rise
The oil cartel Opec and its allies including Russia, known as Opec+, agreed at today’s meeting to stick to their plans for a modest rise in output in April – despite Russia’s invasion of Ukraine, and in defiance of calls from the United States and other major consumers for more supplies, as crude prices rocketed to $112 a barrel.
Brent crude shot above $110 a barrel to as high as $113.02, a peak last seen in June 2014. US light crude went above $111 and is now at $110.5 a barrel. Both contracts are more than 7% higher on the day.
Yesterday’s move by the United States and 30 countries to release 60m barrels of oil from their strategic reserves in an attempt to stabilise global energy markets has had little to no impact so far.
Today’s Opec+ meeting lasted less than a quarter of an hour – the shortest meeting on record – and according to Reuters, no mention was made of Ukraine.
The group said in a statement:
Current oil market fundamentals and the consensus on its outlook pointed to a well-balanced market, and that current volatility is not caused by changes in market fundamentals but by current geopolitical developments.
Alexander Novak, the Russian deputy prime minister, who attended the talks, said he hoped oil market volatility would ease and that Russian output was expected to reach pre-pandemic levels in May.
Opec+ has been hiking output by 400,000 barrels per day each month since August, unwinding cuts made when the coronavirus pandemic led to a slump in demand for oil. The next meeting is scheduled for 31 March.
Updated
Fed's Powell: rate hikes coming despite Ukraine uncertainty
US Federal Reserve chair Jerome Powell has said that the central bank will push on with plans to hike interest rates this month to counter sky-high inflation, although the outbreak of war in Ukraine has made the outlook “highly uncertain”.
In prepared remarks for his testimony to the US House of Representatives’ financial services committee, Powell reiterated the Fed’s view that high inflation and an “extremely tight” labour market warrant higher interest rates.
In the UK, we’ve had more evidence of a booming housing market.
A shortage of homes for sale last month sent house price growth spiralling for the seventh consecutive month to 12.6%, prompting concerns that property values are moving further out of reach of first-time buyers.
Prices of the average home increased by 1.7% in February to more than £260,000 for the first time, said the building society Nationwide, accelerating the pace of growth from 11.2% in January.
Britain’s biggest housebuilder, Persimmon, has announced profits of nearly £1bn for 2021, but cautioned that the Ukraine invasion could disrupt the the UK economy in the year ahead. Its shares were among the top risers on the FTSE 100, up 4.5% this afternoon.
Persimmon’s profits jumped by nearly a quarter to £970m thanks to “positive pricing conditions” in every British region in which it operated, as the house price boom defied the coronavirus pandemic, it said today.
Dean Finch, Persimmon’s chief executive, said he was “mindful of the growing risk of an economic impact as a result of the tragic conflict in Ukraine”, but added he expected continued house price rises to “mitigate build cost inflation”, suggesting higher costs for materials and labour would be passed on to buyers.
Vistry Group, the sixth biggest London-listed housebuilder formerly known as Bovis Homes, also announced bumper results on Wednesday, saying it had more than tripled its annual profits to £320m.
Everton suspends sponsorship deals with Russian firms
Everton FC has suspended its commercial ties with the Russian companies USM, Megafon and Yota. The football club said in a statement:
Everyone at Everton remains shocked and saddened by the appalling events unfolding in Ukraine.
This tragic situation must end as soon as possible, and any further loss of life must be avoided.
The players, coaching staff and everyone working at Everton is providing full support to our player Vitalii Mykolenko and his family and will continue to do so.
The Club can confirm that it has suspended with immediate effect all commercial sponsorship arrangements with the Russian companies USM, Megafon and Yota.
Alisher Usmanov has seen his assets frozen as part of sanctions imposed by the European Union and the Uzbekistan-born billionaire’s USM Holdings sponsors Everton’s training ground, with an initial five-year deal announced in 2017. It also has an option on naming rights for Everton’s new stadium – a deal worth £30m to the club.
MegaFon is among USM Holdings’ businesses and Everton Women signed a multi-year principal partnership deal with the telecommunications operator in October 2020, when Yota – part of the MegaFon Group – was added to the sleeve.
Dutch natural gas hits record high
British and Dutch natural gas prices have jumped as traders fretted about the impact of war in Ukraine and western sanctions on Russian gas supplies.
The British wholesale gas contract for day-ahead delivery jumped 85p to 380p per therm, while the April contract rose 68.5p, or 23.5%, to 360p per therm.
The Dutch April gas contract hit a new record high of €185 per megawatt hour, and is currently trading 29% higher at €158.60.
Brent crude has climbed more than 6% to $111.46 a barrel, after breaching $113 a barrel earlier, the highest since June 2014. Russia accounts for a tenth of global oil supplies and is the second-largest oil exporter after Saudi Arabia. Brent crude has gained more than 40% so far this year.
The Italian oil giant ENI said today that it was pulling out of the Blue Stream natural gas pipeline that links Russia to Turkey, which the company jointly controls with Russian energy giant Gazprom.
A spokesperson said that ENI intends to sell its 50% stake in Blue Stream, following similar moves by BP, Shell and ExxonMobil to exit Russian projects.
Some sobering numbers from a Dutch energy expert.
— Rutger Bregman (@rcbregman) March 2, 2022
➡️About 15% of Dutch gas is Russian import (European average: 40%)
➡️We'd need 2,300 windmills on land or 125 km2 of solar farms to substitute that 15%
➡️Last year we built 183 new windmills. We have just 9 km2 of solar power... https://t.co/sjgRDrJrxn
Updated
Commodities prices boom, from metals to wheat and corn
Commodities prices are booming as sanctions on Russia bite, triggering supply fears: aluminium hit a new record today and nickel and palladium are also rising.
Three-month aluminium on the London Metal Exchange reached $3,552 a tonne. It has gained 37% over the past two-and-a-half months, initially on weaker output due to power issues and more recently in the wake of the Russian invasion of Ukraine.
Commerzbank analyst Daniel Briesemann told Reuters he wouldn’t be surprised to see aluminium rise to $4,000 a tonne. Commerzbank analysts said in a note:
Supply outages from Russia are now but a question of time. Depending on how long they last, they could cause turmoil – in which case prices would rise significantly further.
The price of nickel, used in electric car batteries, rose to $25,530 a tonne, close to an 11-year high reached last week. Palladium, used in catalytic car converters to curb emissions, is hovering near a seven-month peak hit on Tuesday. Zinc and copper prices are also climbing.
Wheat and corn prices continue to climb, as Russia and Ukraine are major exporters of both grains. Wheat prices hit $10.59 a bushel, the highest since March 2008, while corn rose to $7.47 a bushel, the highest since December 2012.
Analysts at ING said:
Global buyers of grains have been increasingly turning to the US, Europe or South America to secure supplies in the medium term, given the ongoing conflict. Moreover, demand for stockpiling has also increased due to current uncertainty.
Germany is considering a slower exit from coal-powered energy, in case Russia stops gas deliveries to Europe, economy minister Robert Habeck said today.
The comments, made on public radio Deutschlandfunk, show how the escalating war in Ukraine has impacted Germany’s planned shift to a zero carbon economy.
In remarks that would have been unthinkable for a Green minister just a week ago, Habeck said:
Short-term it may be that as a precaution and in order to be prepared for the worst, we have to keep coal-powered plants on standby and maybe even let them operate.
Pragmatism must trump every political commitment.
The security of supplies must be safeguarded.
In response to Russia’s invasion of Ukraine last Thursday, German chancellor Olaf Scholz pulled the plug on the planned Nord Stream 2 gas pipeline to ship gas directly from Russia to Germany. He has also announced plans to build two liquified natural gas terminals to handle LNG imports, as an alternative to Russian gas, as well as creating a national gas and coal reserve.
The German government had planned to shut its nuclear power stations by the end of this year, and phase out coal-fired power stations by 2030, but the Ukraine crisis has forced a rethink.
Updated
Ryanair has pledged to be “the first airline to return to Ukraine” when it is safe to do so after the Russian invasion, reports our transport correspondent Gwyn Topham.
Its chief executive, Michael O’Leary, said Ryanair had been set to fly 2 million people to four airports in the country this year and had hoped to expand further before the invasion last week.
He said he did not believe it would be possible to fly to Ukraine “for the foreseeable future, after Russia … essentially disabled a lot of the flight systems”.
He added: “We will be the first airline to return to Ukraine when it is safe to do so … but I suspect it will take until next winter, when hopefully the Ukrainians will have seen off the Russians and sent them back to where they came from.”
O’Leary said Ryanair was flying humanitarian cargo in the belly of its planes “for the first time in 30 years” to Polish airports, liaising with Ukrainian embassies.
The airline has had a surge in bookings to Poland, where family members are flying to reunite with Ukrainian refugees close to the border. Wider flight bookings on Ryanair have otherwise dropped about 20% in the first days of the conflict, and are still around 10% down.
It is not the place for cryptocurrency exchanges to block transactions by Russian users, the founder of one of the largest trading platforms has said, amid concern that digital currencies are being used to bypass sanctions, reports my colleague Joanna Partridge.
The chief executive and founder of Binance, Changpeng Zhao, said the company was “not in a position to sanction, like, populations of people”.
“There are a few hundred individuals that are on the international sanctions list in Russia, mostly politicians, and we follow that very, very strictly,” Zhao told BBC Radio 4’s Today programme.
“We differentiate between the Russian politicians who start wars and the normal people, many normal Russians do not agree with war.”
He added: “We are not political, we are against war, but we are here to help the people.”
Updated
Europe’s main stock indices have turned positive, while the FTSE 100 index in London (which opened higher unlike the rest of Europe) has extended gains.
- UK’s FTSE 100 up 0.9%, or 65 points, to 7,395
- Germany’s Dax up 0.5% at 13,972
- France’s CAC up 0.6% at 6,433
- Italy’s FTSE 100 up 0.3% at 24,442
The rouble has lost 8%, falling to 109.15 per dollar today as westerns sanctions against Russia wreaked havoc on the country’s financial system. The Russian currency hit 110 per dollar earlier.
There has been speculation that Vladimir Putin might turn to cryptocurrencies such as bitcoin to bypass western sanctions, as crypto doesn’t operate through traditional banking channels.
The war in Ukraine has boosted demand for bitcoin in both countries, as sanctions have effectively cut Russia off from the global financial network, while Ukraine has imposed strict capital controls. Russians and Ukrainians have been buying bitcoin above the US market rate. Its price jumped more than 15% yesterday and it is currently trading 1% higher at $44,352.
Updated
Eurozone inflation hits new record high of 5.8%
Away from the markets, eurozone inflation has jumped to another record high.
Inflation in the 19 countries sharing the euro unexpectedly rose to an annual rate of 5.8% in February from 5.1% in January, according to a flash estimate released by Eurostat, the statistical office of the European Union.
Energy costs rose at an annual rate of 31.7% after a 28.8% rise in January while food and alcohol prices were up 4.1%, compared with 3.5% in January.
Inflation in Germany picked up to 5.5% from 5.1% in January, while Italy was even higher at 6.2% from 5.1% and Spanish inflation surged to an estimated 7.5% from 6.2%. France recorded a 4.1% rate last month, up from 3.3% in January.
The escalating war in Ukraine has sent wholesale oil and gas prices and other commodity prices soaring, from metals to wheat, which threatens to push global inflation even higher in coming months.
OUCH! Eurozone #inflation hits yet another ATH. Unexpectedly accelerates to 5.8% YoY in Feb, up from 5.1% in Jan and more than the 5.6% median economist estimate in a BBG survey. pic.twitter.com/pDAfOm5pW1
— Holger Zschaepitz (@Schuldensuehner) March 2, 2022
Sberbank shares collapse 95% in London
While the Moscow stock exchange remains shut for a third day, some Russian companies have secondary listings in London. Shares in Sberbank, the biggest lender, have collapsed almost 95% and are worth just 1 US cent.
The bank has been forced to pull out of Europe after the European Central Bank ordered its European arm to close last night, saying it was failing or likely to fail following a customer run on deposits.
Opec and allies likely to stick to modest oil output boost
The Opec oil cartel and its allies are likely stick to modest oil output rises when they meet later today, officials said.
Officials said Saudi Arabia, the world’s biggest oil producer, and the United Arab Emirates had reconfirmed their deal with Russia, the second-biggest oil exporter, despite widening sanctions against Moscow and oil prices hitting eight-year highs.
Brent crude, the global benchmark, shot up to over $113 a barrel this morning, the highest since June 2014, and is now trading at $11041 a barrel, up 5.2%. US light crude went over $111 a barrel, the highest since August 2013, and is now at $108.75.
The Organization of the Petroleum Exporting Countries (Opec) and allies led by Russia – a group known as Opec+ – have been pumping 400,000 more barrels per day (bpd) each month since August, to unwind cuts made after the Covid-19 pandemic slashed demand.
The United States has repeatedly said it would like to see Opec+ ramp up production more, but only a few countries have capacity to do so, including Opec leader Saudi Arabia and its Gulf neighbour, the UAE.
Four Opec+ sources told Reuters yesterday that the group would probably agree another 400,000 bpd increase for April. They said Russia’s invasion of Ukraine had had no impact so far on the functioning of the supply agreement.
Bloomberg News reported that while Russia increased its oil production in February, it probably missed its quota for a third month.
Russia increased its oil production in February, yet likely pumped below its OPEC+ quota for a third consecutive month https://t.co/mK87c5Kug4
— Bloomberg (@business) March 2, 2022
Updated
Natural gas prices spike nearly 40%
While oil prices are still trading more than 6% higher, with Brent crude above $111 a barrel, natural gas prices have also spiked, taking them close to record highs.
Amid fears that war in Ukraine could disrupt gas flows to Europe, British natural gas benchmark rose 37% to 397.48p per therm, while the Dutch gas futures contract jumped 39% to €169.5 per megawatt hour.
However, Russia’s Gazprom said this morning that it was shipping gas to Europe via Ukraine in line with customers’ requests.
Updated
Here is our full story on Sberbank, Russia’s biggest lender, pulling out of Europe after a run on deposits and an order by the European Central Bank to close its European arm.
The bank said in a statement that its European subsidiaries had faced “abnormal cash outflows”, meaning it could no longer supply them with liquidity, reports my colleague Joanna Partridge. However, Sberbank said it had sufficient capital to be able to make payments to all of its depositors.
Sberbank has been operating in Germany, Austria, Croatia, and Hungary among other countries, and had European assets worth €13bn (£10.8bn) at the end of 2020.
The lender’s announcement came only hours after the European Central Bank had ordered closure of its European arm, warning it could fail after a run on deposits amid a backlash resulting from the Russian president Vladimir Putin’s invasion of Ukraine.
They went on to say:
The World Bank and the IMF are also working together to assess the economic and financial impact of the conflict and refugees on other countries in the region and the world. We stand ready to provide enhanced policy, technical, and financial support to neighbouring countries as needed.
Coordinated international action will be crucial to mitigate risks and navigate the treacherous period ahead. This crisis affects the lives and livelihoods of people around the world, and we offer them our full support.
IMF, World Bank condemn Russian invasion of Ukraine in rare political statement
The International Monetary Fund and the World Bank last night issued a rare political statement condemning Russia’s invasion of Ukraine.
IMF managing director Kristalina Georgieva and World Bank president David Malpass said:
We are deeply shocked and saddened by the devastating human and economic toll brought by the war in Ukraine. People are being killed, injured, and forced to flee, and massive damage is caused to the country’s physical infrastructure. We stand with the Ukrainian people through these horrifying developments.
The war is also creating significant spillovers to other countries. Commodity prices are being driven higher and risk further fueling inflation, which hits the poor the hardest. Disruptions in financial markets will continue to worsen should the conflict persist. The sanctions announced over the last few days will also have a significant economic impact. We are assessing the situation and discussing appropriate policy responses with our international partners.
They said the institutions were working together to support Ukraine, and the IMF would respond to the country’s request for emergency financing next week. Ukraine is also eligible for $2.2bn under a pre-existing IMF programme between now and the end of June.
The World Bank is preparing a $3bn package of support in the coming months, starting with at least $350m that will be submitted to the board for approval this week, followed by $200m in fast-disbursing support for health and education.
The Swiss billionaire Hansjörg Wyss has claimed he has been offered the chance to join a takeover bid for Chelsea as pressure grows on Roman Abramovich to sell the club, writes our football reporter Jacob Steinberg.
Abramovich’s future at Chelsea is in doubt after he announced plans to relinquish the running of the club and the Labour MP Chris Bryant claimed that the Russian was hastily selling UK properties to avoid potential financial sanctions.
Abramovich’s decision to transfer the stewardship and care of Chelsea to the trustees of the club’s charitable foundation came after a call in parliament for him to face sanctions following the invasion of Ukraine. The move has increased the sense that the 55-year-old, who has vehemently disputed reports suggesting his alleged closeness to Vladimir Putin and Russia or that he has done anything to merit being sanctioned, could be ready to tempted to sell.
Time for a quick news round-up.
Apple announced last night that it would pause product sales in Russia. Apple Pay and other services have been limited, and Russian state media, RT News and Sputnik News, are no longer available for download from the Apple Store outside Russia.
An MP has claimed that the Russian oligarch and Chelsea football club owner, Roman Abramovich, is hastily selling UK properties to avoid potential financial sanctions.
Chris Bryant, the Labour MP and head of the parliamentary standards committee, said the government was moving too slowly on imposing sanctions on those with alleged links to Vladimir Putin following Russia’s invasion of Ukraine.
He told the Commons on Tuesday: “I think he [Abramovich] is terrified of being sanctioned, which is why he’s already going to sell his home tomorrow, and sell another flat as well. My anxiety is that we’re taking too long about these things.”
Announcing a package of measures in the wake of the conflict, the Foreign Office said “120 businesses and oligarchs” would be hit by swingeing new financial restrictions. Only a handful of individuals have so far been targeted, however.
Updated
FTSE 100 rises at the open while European shares fall
The FTSE 100 index in London has opened 0.5% higher, while Germany’s Dax fell 0.5%, and Italy’s FTSE MiB lost 1.3%. France’s CAC and and Spain’s Ibex slipped 0.1%.
The Russian mining groups Evraz and Polymetal are the main risers on the FTSE 100, but are expected to be ejected from the index in a reshuffle tonight after heavy share price declines in recent days.
Other mining companies, Rio Tinto and Fresnillo, along with oil giants Shell and BP and the commodities trader Glencore, are also among the gainers in early trading. They are set to benefit from surging oil, gas and other commodities prices, from metals to wheat.
Updated
Crude oil prices continue to surge: Brent crude just jumped $8 past $113 a barrel, the highest since June 2014. US light crude rose to $111.5 a barrel, the highest since August 2013.
Amanda Blanc, chief executive of the British insurer Aviva, has just said that the company would divest from Russia “as soon as we practically can”.
Speaking on a results call to reporters, she said the firm’s asset management arm, Aviva Investors, had less than 0.1% of funds invested in Russia.
The insurer Hiscox said it had “negligible exposure” to Ukrainian and Russian assets.
Updated
More on Sberbank’s European arm, which has been closed by order of the European Central bank, after a run on deposits.
The central banks of Slovenia and Croatia announced that Sberbank’s operations in their countries would be taken over by Slovenia’s biggest banking group NLB and the Croatian Postal Bank, which is majority owned by the government.
Customers will be able to withdraw money as normal from Wednesday after restrictions over the past two days.
Sberbank Europe said in November it had reached a deal to sell its subsidiaries in Croatia, Slovenia, Hungary, Serbia and Bosnia and Herzegovina to a group including Serbia’s AIK bank and Slovenia’s Gorenjska bank.
Introduction: Brent crude blasts past $111 a barrel; Sberbank Europe closed
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The Brent crude oil price has blasted past $111 a barrel, its highest level since early July 2014, despite a decision by the United States to release, with its allies, about 60m barrels from their strategic reserves, in an attempt to stabilise global energy markets. US light crude has also jumped more than 6%, to $109.48 a barrel, its highest since September 2013.
The oil cartel Opec will hold a meeting today to discuss production plans. So far, the cartel confirmed that it remained committed to the Opec+ deal with Russia, and is not expected to change production plans despite the war in Ukraine.
The American oil giant Exxon Mobil announced yesterday that it would exit its Russian operations, including oil production fields, following similar moves by British companies BP and Shell, and Norway’s Equinor.
The Moscow stock exchange will remain shut for a third day, while the rouble is trading at 101.1 per dollar, after hitting a record high of 117 per dollar on Tuesday.
Stocks are in for another rough ride. On Wall Street, the S&P 500 and Nasdaq closed about 1.6% lower while the Dow Jones industrial average dropped nearly 1.8%. Asian markets are mostly lower: Japan’s Nikkei closed down 1.7% while Hong Kong’s Hang Seng lost 1.9%. European bourses are set for a lower open, after suffering declines in the last two days.
Last night, the European arm of Sberbank, Russia’s biggest lender, was closed by order of the European Central Bank.
The ECB had warned on Monday that the bank, based in Vienna, was failing or likely to fail because of a run on deposits. This prompted Austria’s Financial Market Authority to impose a moratorium on the bank’s activities, and just over an hour before the moratorium was due to expire last night, the FMA ordered the bank to close with immediate effect, citing the ECB order.
The US, EU, UK and other nations have responded to Russia’s invasion of Ukraine with a battery of sanctions including banning big Russian banks from Swift, the main global payments system. As a result, Sberbank Europe said on Monday that it had “experienced a significant outflow of customer deposits within a very short period of time”.
As sanctions against Russia widened, a number of British firms scrambled to dump Russian assets yesterday, including Legal & General, Abrdn and the state-run pension scheme Nest, which said they would try to sell holdings in Russian stocks. British Gas owner Centrica became the third big British energy firm to cut ties with Russia within a week, echoing BP and Shell by announcing the end of its gas supply agreement with Kremlin-controlled Gazprom.
The FTSE 100 commodities trader Glencore said it would review its business activities in Russia, including its equity stakes in two Russian-linked companies: state-controlled oil company Rosneft and FTSE 100 miner En+ Group.
Economists at ING said:
Given the war raging on the outskirts of western Europe, it is some surprise how little markets have responded in total, with negative days punctuated by dip-buying in some markets. This is especially true of the equity market, where 1.5% falls yesterday in the Nasdaq and S&P 500 leave both bourses some way above their lows for the year and with equity futures suggesting a more positive outlook.
It’s a different story in bond space. European bond yields were down sharply yesterday. two-year German bond yields fell more than 20bp and 10-year bund yields were down 21bp to -0.08%. US Treasury yields also fell heavily.
The Russia-Ukraine conflict will probably continue to dominate markets for the foreseeable future. The announcement yesterday that Russia will not pay coupons to foreign holders on its government debt should push investors further into safe-havens. Support for starting the EU membership process for Ukraine shows the unity of support for Ukraine from Western Europe but is unlikely to help calm tensions.
The Agenda
- Opec meeting
- 8.55am GMT: German unemployment for February
- 10am GMT: Eurozone inflation for February (flash estimate)
- 1.15pm GMT: US ADP jobs report for February
- 3pm GMT: Bank of Canada interest rate decision
- 3pm GMT: US Federal Reserve chair Jerome Powell testifies
- 4pm GMT: Russia unemployment rate for January
Updated
