Closing summary
Oil and gas prices soared earlier, but have now retreated, while other commodities such as wheat, aluminium and nickel are still rising amid supply fears sparked by Russia’s week-long invasion of Ukraine.
Brent crude is trading 0.1% higher at $113.04 a barrel while rising through $119 this morning, a nine-year high. US light crude is at $110.09 a barrel.
British wholesale gas for next day delivery has risen 2% to 402.50p per therm, approaching the record high above 450p set last December. The Dutch April gas futures contract was up 1.7% this afternoon at €168.4 per megawatt hour, after hitting a new peak of €186 earlier.
The Russian rouble hit another record low today, falling to 118.35 per dollar in Moscow, while the Moscow stock exchange has been shut all week.
On Wall Street, the Dow Jones has edged up 0.3% to 33,991 while the Nasdaq is unchanged at 13,756 and the S&P 500 has edged 0.4% higher to 4,403. European shares also rose in early trading but later turned negative. The FTSE 100 in London has lost 107 points to 7,322, a 1.45% drop while Germany’s Dax has lost 0.75%, France’s CAC has slipped 0.1% and Italy’s FTSE MiB is 1.2% lower.
The London Stock Exchange has suspended trading in 27 companies with strong links to Russia, including energy and banking giants Gazprom and Sberbank. The LSE said it was moving to block trading in the companies, which also include EN+, Lukoil and Polyus, with immediate effect “in light of market conditions, and in order to maintain orderly markets”.
Ikea and other companies have temporarily suspended operations in Russia and Ukraine.
Burberry has ceased shipments to Russia effectively shutting down its online operation there. The company has three stores in the country, one of which is run by a franchisee, and these currently remain open but they are not receiving new deliveries.
Here are today’s other main stories:
Many thanks for reading. We’ll be back tomorrow. Take care, JK
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Marks & Spencer has just put out a statement. It has suspended shipments to its Turkish franchisee’s Russian business.
It said it was “doing everything we can to support the people of Ukraine” and in response to the growing refugee crisis, announced a £1.5m package to support the UN Refugee Agency (UNHCR) and UNICEF to help children and families in need.
This is made up of a kickstart £500,000 donation to UNHCR with a further £500,000 for matched fundraising for all its global staff and double donations on Sparks transactions to support UNICEF, and activation of till-point and online giving in the UK.
M&S is also sending 20,000 units coats and thermals for families in need, worth a further £500,000, to Ukraine, where it temporarily shut its 10 stores a week ago. In Russia, it has 48 stores with 1,200 employees.
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British drinks group Halewood has halted production of its JJ Whitley vodka in Russia, reports our consumer affairs correspondent Zoe Wood.
The company, which owns a distillery in St Petersburg, has moved production to its manufacturing site in Chorley, Lancashire. A spokeswoman said Halewood was “100% opposed to the Russian Army invasion of Ukraine”. “We have expressed our support to our Ukrainian customers, our largest export market.”
The company has also removed references to Russia from the vodka brand’s marketing, according to The Grocer magazine which first reported the story.
Here is our full story on the UK government’s decision to block Russian aviation and space companies from accessing insurance through the London Market:
Western sanctions must be extended to include all Russian banks, ending the carve-out for energy-related Russian institutions, the UK foreign secretary has said following a meeting in Vilnius with foreign ministers from the three Baltic countries.
Liz Truss said the UK “was trying to make sure the Russian economy is crippled so that it can no longer be able to fund its war machine”, adding that she hoped the Russian people would draw their conclusions if this happened.
Oil prices retreat, other commodities still rising
Oil prices have retreated after surging through $119 a barrel this morning, with Brent crude down 1% at $111.82 a barrel while US crude is nearly 2% lower at $108.5 a barrel.
Other commodities prices are still rising: aluminium, copper and nickel have bolted to new highs today as Russia’s growing isolation threatens to further disrupt the flow of commodities from a major producer.
Three-month nickel on the London Metal Exchange rose to its highest level since April 2011, at $27,976 a tonne. Aluminium hit a new record of $3,741 a tonne, while copper climbed 2.5% to $10,478 a tonne. Zinc traded above $4,000 per tonne for the first time in nearly 15 years.
Russia produces 6% of the world’s aluminium, 7% of nickel and 3.5% of copper, according to Reuters.
Chicago wheat futures have climbed to 14-year highs of $11.34 a bushel, and are up nearly 40% over the past month. Malaysian palm oil prices hit a record high of 6,950 ringgit a tonne, while US soy oil hit its highest levels since 2008.
Newcastle coal futures hit a record $440 a tonne this week after sanctions were imposed on the world’s third-largest exporter, as buyers scrambled to get coal elsewhere.
The wholesale price increases will ultimately push up already-high household energy bills even further, as well as food prices.
Paul Donovan, chief economist at UBS Global Wealth Management, said:
Because food is a necessity, higher food prices will lead to changing developed economy consumption patterns. More money spent on food, within a constrained budget, means less money to spend on other goods (or services). The goods demand slowdown is likely to be modest, but it comes at a time when global goods supply is at a record high.
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The boss of the British fund manager Schroders, Peter Harrison, has said that Russian stocks and bonds are “in the realms of utterly uninvestable”.
As Russia continues to bombard Ukrainian cities, its international isolation has deepened. Harrison told Reuters that the invasion “will fundamentally change the nature of Europe for a very long time to come”.
Schroders’ holdings of Russia, Ukraine and Belarus-exposed securities amount to less than 0.1% of the fund manager’s total assets.
Like other asset managers, Schroders has pending sell orders on Russian stocks but is unable to to complete any sales because the Moscow stock exchange has been suspended all week.
Harrison said the situation for foreign investors is likely to worsen further. Referring to Russia’s currency reserves, he said:
My anticipation would be that sanctions get stronger, and the cumulative impact of running down reserves will be felt ever more acutely, so things that are seemingly difficult now will feel impossible in a week’s time.
Ikea suspends operations in Russia, affecting 15,000 workers
Ikea has become the latest western company to suspend its operations in Russia, as it temporarily closed all stores and factories across the country, which will affect 15,000 workers. It cited “serious disruptions to supply chain and trading conditions”.
The Swedish flatpack furniture giant has shuttered its 17 stores across Russia, but said it would keep its Mega shopping centres open to allow access to essential retailers, such as food shops and pharmacies.
It will also pause production at three factories in Russia, and all export and import in and out of Russia and Belarus.
The move sees it join a growing list of firms suspending activities in Russia in response to the war in Ukraine, following similar moves by online fashion groups Asos and Boohoo, as well as US tech giants Apple and Google, sportswear brand Nike, the Smirnoff maker Diageo and the Coca-Cola HBC bottling firm.
Brand owner Inter Ikea and store owner Ingka Group said they had “secured employment and income stability” for the workers directly impacted by the decisions.
The war has a huge human impact already. It is also resulting in serious disruptions to supply chain and trading conditions. For all of these reasons, the company groups have decided to temporarily pause Ikea operations in Russia.
The devastating war in Ukraine is a human tragedy and our deepest empathy and concerns are with the millions of people impacted.
Ikea has been in Russia since 2000 and is thought to be one of the largest western employers there. It made sales of €1.6bn there in the last financial year, around 4% of total retail sales.
Updated
Online booking firm Expedia has stopped selling travel in and out of Russia, one of the first travel companies to announce the change, reports our travel correspondent Gwyn Topham.
An Expedia spokesperson said:
In response to recent acts and government-imposed sanctions weighed against Russia, we have ceased the sale of travel into and out of Russia.
We are saddened by what continues to unfold in Ukraine and will continue to do what we can to support impacted travelers, partners, and our team members with families and friends in the affected areas.
The move is unlikely to cost Expedia much, with sanctions and flight bans effectively curtailing the - already relatively limited - tourism from the West into Russia, and vice versa, for the foreseeable future.
However, online travel competitors such as Opodo were still selling future flight and hotel packages to Russia on Thursday, and AirBnB was listing Russian vacation properties.
LVMH, the owner of Louis Vuitton, Givency and Christian Dior, as well as Dom Perignon and other top Champagne brands and Glenmorangie, said it was providing “essential financial and operational assistance” to its 150 employees in Ukraine and donating €5m to the Red Cross. It didn’t mention trading in Russia, reports our retail correspondent Sarah Butler.
Pressure is growing on luxury and other western brands to pull out of Russia after it invaded Ukraine.
Diageo, which makes Smirnoff vodka and Guinness, has paused exports to Russia and Ukraine, while Coca-Cola HBC has halted production at its bottling factory in Kyiv and evacuated workers.
Among the western companies pulling out of Russia, the online fashion retailer Boohoo said it had suspended sales to Russia immediately after the invasion a week ago, and closed its Russian trading websites.
The company said:
Boohoo is deeply concerned about the tragic developments in Ukraine. Immediately following the invasion, the group suspended sales to Russia, and also closed its Russian trading websites. Sales made by the group into Russia are not material, totalling less than 0.1% of group revenues.
The west has declared all-out financial war with Russia. What does this mean? asks David Edgerton, Hans Rausing Professor of the history of science and technology and professor of modern British history at King’s College London.
War is never just a matter of soldiers and weapons. Indeed, economic warfare has been a central overt aspect of war, especially obvious since the beginning of the 20th century. It still is today, but we call it “sanctions”. But sanctions are a form of war, not an alternative to it, and like war, dangerous, damaging and unpredictable in impact.
On Sunday night and Monday morning, the US and Europe imposed the most crippling and severe sanctions ever levelled against a G20 country. Russia has been treated like Iran, North Korea, Venezuela. Russian money, until recently so eagerly sought, so politically efficacious, not least in London, has been sterilised.
The economic war that the EU and Nato members have launched against Russia is mainly financial, and technological, cutting off the Russia state from its overseas assets, which are now unusable, and preventing it from buying all sorts of critical equipment. The overseas operations of Russian financial institutions have been hobbled and Russian financial institutions expelled from the technical mechanisms of global capitalism. The consequences have been clear, a huge devaluation of the rouble, a doubling of rouble interest rates, potential runs on domestic banks, and the possibility of inflation. The Russian state has been financially disarmed, externally at least.
The attack is not a total one, quite deliberately so. Russia can still sell its two main exports for hard cash, energy and grain, but that is a measure of the strength of the west. It does not want to deprive the world economy of supplies at a time of rising commodity prices. But who is in charge is completely clear, and what expectations are also. Foreign investors in Russia are pulling out as best they can, like BP and Shell, and cultural and sporting bodies are acting to ban Russia. Social media imposes controls, mendacious broadcasters banned.
Overnight, the credit ratings agency Fitch cut its rating on Russia’s debt to “junk” status. It also downgraded 10 Ukrainian companies.
Fitch said the severity of sanctions placed on Russia “represents a huge shock to Russia’s credit fundamentals” and could “undermine its willingness to service government debt”. The ratings agency warned:
Developments will weaken Russia’s external and public finances, severely constrain its financing flexibility, markedly reduce trend GDP growth, and elevate domestic and geopolitical risk and uncertainty.
The Russian economy could shrink by 7% this year, according to a Goldman Sachs forecast – which would plunge it into a deeper recession than the one caused by Covid-19 as a result of western sanctions and the country’s increasing isolation after invading Ukraine.
The European Union is considering excluding banks in Belarus from the Swift global payments system, as it has already done for seven Russian banks, an EU official said on Thursday, according to Reuters. It quoted the official as saying:
On the Swift side, we’re also looking now at the preparation of the equivalents for the Belarus financial sector, but knowing that SWIFT is not as strategically important in the Belarus economy as it is in the Russian side.
Belarus is a major exporter of timber, and mounting sanctions against the country could drive up timber prices.
Yesterday, the UK sanctioned four Belarusian arm chiefs and two military enterprises, in a first wave of sanctions against the country for its role in Russia’s invasion of Ukraine. Foreign Secretary Liz Truss said Belarus leader Alexander Lukashenko had aided and abetted Russia’s invasion, by allowing Russian forces to attack Ukraine from Belarus.
France seizes yacht linked to Rosneft boss Sechin
French authorities have seized a yacht linked to Rosneft boss Igor Sechin, a close ally of Vladimir Putin, French finance minister Bruno Le Maire tweeted.
The press statement issued by his department said the yacht was owned by an entity of which Sechin is a main shareholder.
Un yacht appartenant à un oligarque russe a été saisi.
— Bruno Le Maire (@BrunoLeMaire) March 3, 2022
Merci aux douaniers français qui font respecter les sanctions de l'Union européenne à l'encontre des proches du pouvoir russe. pic.twitter.com/AZVzmlet2P
France’s Société Générale, which is one of the most exposed banks to Russia, has warned that its assets in the country could be confiscated in a worst-case scenario.
The bank, which has $20bn exposure to Russia and gets nearly 3% of its profits from Russia, said:
The group has more than enough buffer to absorb the consequences of a potential extreme scenario, in which the group would be stripped of property rights to its banking assets in Russia.
The group is conducting its business in Russia with the utmost caution and selectivity, while supporting its historical clients.
Italy’s biggest bank Intesa Sanpaolo is carrying out a strategic review of its presence in Russia following Moscow’s invasion of Ukraine.
European banking shares have been battered over the past week, but traded higher today.
Regulators are preparing for a possible closure of the European arm of Russia’s second-biggest lender, VTB Bank. The European arm of Sberbank, the country’s biggest bank, was closed on Tuesday night after a run on deposits.
Citigroup could face billions of dollars of losses at its Russian operations and is helping some of its 200 staff in Ukraine leave the country. The US bank’s exposure to Russia was nearly $10bn at the end of last year.
The drinks giant Diageo, which makes Smirnoff vodka and Guinness, has paused exports to Russia and Ukraine. A spokesperson told Reuters:
Our priority is the safety of our people in Ukraine and the wider region.
IoD: no longer tenable for Brits to sit on boards of Russian firms
The UK’s Institute of Directors has said that it is no longer tenable for British people to hold board positions in Russian companies.
Jonathan Geldart, its director general, said:
The Institute of Directors expresses its solidarity with Ukraine and its people, who are facing intolerable suffering.
Although directors owe legal duties to the companies on whose boards they serve, they should also feel a stronger moral duty to uphold the fundamental values of freedom and democracy. We believe that it is no longer tenable for British directors to be involved in governance roles in the Russian economy. Therefore, we hope that they will now question the viability of their mandates in Russian and Belarusian companies.
The IoD carried out a poll of its members where 86% were in support of the view that all British people should now resign their Russian board mandates.
The institute has also decided to suspend all activities with Russia for the foreseeable future.
Severstal directors resign a day after Mordashov quits Tui board and shifts Nordgold stake to his wife
Alexey Mordashov was sanctioned by the EU on Monday after Russia’s invasion of Ukraine, and filings in the UK showed that he had shifted control of a $1.1bn stake in the mining company Nordgold to his wife, Marina Mordashova (probably before the sanctions).
He was forced to step down as a Nordgold director and resigned from the board of Tui, the world’s biggest tour operator, yesterday.
The EU sanctions mean he can’t access his 34% shareholding in Tui, where he is the single largest shareholder.
The Russian oligarch is also the main shareholder and chairman of Severstal, a Russian mining, metal and energy conglomerate.
Today, Severstal announced that Sakari Tamminen, Philip Dayer and Alun Bowen have resigned as independent directors from its board. Agnes Ritter, chief technical officer and head of transformation, has also resigned from the board.
Alexander Shevelev, Severstal’s chief executive, said he regretted to inform shareholders that they had resigned from the board “in light of the present geopolitical situation”.
They have been core members of the board team for many years and I’d like to thank them for their competence and valuable contribution to our business.
Updated
Here’s our full story on the London Stock Exchange suspending trading in 27 companies with strong links to Russia, including energy and banking giants Gazprom and Sberbank.
The LSE said it was moving to block trading in the companies, which also include EN+, Lukoil and Polyus, with immediate effect “in light of market conditions, and in order to maintain orderly markets”.
International pressure is taking an increasing toll on Russian businesses, while the invasion of Ukraine is also disrupting those with operations in the region, with miners Evraz, in which Roman Abramovich owns a 29% stake, and Polymetal dropping out of the FTSE 100 in its quarterly review as their market values have plummeted.
Russian airlines shut out of UK insurance market
Russian aviation and space companies have been shut out of Lloyd’s and the overall UK insurance market, the UK government has announced today. This will severely limit their ability to obtain insurance cover in the global insurance and reinsurance market, it said.
The UK government will bring in legislation to prohibit UK based insurance and reinsurance providers from undertaking financial transactions connected with a Russian entity or for use in Russia. Coupled with similar actions by the EU, this move further isolates Russia’s economy from the international financial system.
It is the latest blow for Russian airlines after the UK and most of Europe banned them from their airspace.
Updated
European stock markets have given up their small gains in early trading and have turned negative again.
The FTSE 100 in London has fallen 21 points, or 0.23%, to 7,407 while Germany’s Dax is 0.65% lower, and France’s CAC and Italy’s FTSE MiB are flat.
Polymetal, the Anglo-Russian precious metals miner, is the biggest faller on the FTSE 100, down 29%. The company has been relegated from the index, along with Evraz, and will be listed in the FTSE 250 from next week.
Natural gas prices continue to climb, and the British benchmark is approaching the record high hit at the end of last year. It is currently 8.3% higher at 426.9p per therm, not far from the all-time high of around 450p in December.
The Dutch April gas futures contract has gained more than 12% to €186 per megawatt hour, setting a new record.
Stock markets in Europe are mixed at the open, after Asian shares edged cautiously higher.
The UK’s FTSE 100 index has edged 21 points, or 0.3%, higher to 7,451. France’s CAC is flat, Spain’s Ibex has slipped 0.3% and Italy’s FTSE MiB is 0.5% ahead.
In London, the London Stock Exchange is the top riser after the company almost doubled pre-tax profits to to £987m last year. The shares have jumped nearly 10%. The commodities trader Glencore, mining stocks Anglo American, Antofagasta and Rio Tinto and the oil giant BP are the other main risers, as they stand to benefit from the surge in oil and commodities prices. Taylor Wimpey, the housebuilder, has gained 1.9% after bumper results.
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Coca-Cola HBC has halted production at its bottling factory in Kyiv and evacuated employees following Russia’s invasion of Ukraine.
The London-listed company, one of the main bottlers for Coca-Cola worldwide, generated a fifth of its sales and operating profit from Russia and Ukraine last year.
Introduction: Oil at nine-year peak, wheat at 14-year high
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
A week after Russia’s invasion of Ukraine began, Russia has claimed to have captured the strategically important southern city of Kherson on the Black Sea, although it is unclear whether Russian troops have fully captured the city. The Ukrainian capital, Kyiv, has come under more heavy shelling as Russian forces step up their offensive.
You can read more on our Ukraine crisis live blog:
Oil, coal, aluminium, wheat and other commodity prices continue to surge as Russia’s invasion of Ukraine has triggered fears over supply. Brent crude, the global benchmark, rose through $118 a barrel for the first time since February 2013. It is currently around $117 a barrel, up $4 on the day. US light crude is trading at $114.46 a barrel.
Aluminium has hit yet another record high, rising 2.3% to $3,650 on the London metal Exchange (it has gained 30% so far this year), while nickel climbed over 4% to $26,935 a tonne. Russia is a major producer of both metals.
For grains, Russia and Ukraine together are estimated to have accounted for nearly 29% of global wheat exports last year, according to the US Department of Agricultures, so the conflict has jolted global wheat prices higher.
Chicago wheat futures have climbed to 14-year highs of $11.34 a bushel, and are up nearly 40% this month.
The London Stock Exchange has suspended trading in 27 companies with strong ties to Russia, including aluminium producer EN+, Sberbank, Gazprom, Lukoil and gold miner Polyus. The LSE said the move was prompted by “events in Ukraine, in light of market conditions, and in order to maintain orderly markets.”
The Russia-exposed miners Polymetal and Evraz have been ejected from the FTSE 100 after they suffered heavy share price losses following western sanctions on Russia. They are down 77% and 82% respectively so far this year and have been demoted to the FTSE 250 index.
In the latest FTSE 100 reshuffle, gold producer Endeavour Mining and the kitchens maker Howden Joinery will replace them from the start of trading on Monday.
German authorities have reportedly seized the $600m superyacht belonging to Russian billionaire Alisher Usmanov in a Hamburg shipyard. He was on a list of billionaires to face sanctions from the European Union in response to Russia’s 24 February invasion of Ukraine.
Over here, a former Russian deputy prime minister owns an £11.44m luxury flat in London’s Whitehall, and last night Igor Shuvalov was accused of being one of Putin’s “cronies” who had “dipped their hands in blood”.
The Agenda
- 9am GMT: Eurozone Markit Services and Composite PMI final for February
- 9.3am GMT: UK Markit Services and Composite PMI final for February
- 12.30pm GMT: Eurozone ECB monetary policy meeting accounts
- 1.30pm GMT: US Jobless claims for week of 19 February
- 2.45pm GMT: US Markit PMIs final for February
- 3pm GMT: US Federal Reserve chair Jerome Powell testimony
- 3pm GMT: US ISM Non-manufacturing PMI for February
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