Closing summary
It’s been a grim week for global stock markets while oil, gas and other commodity prices have continued to surge, from metals to crops.
Britain’s FTSE 100 index suffered its worst week since March 2020, falling 6.7%. Europe’s Euro Stoxx 600 index ended the week 7% lower, which was also the worst week since the coronavirus pandemic started. Germany’s Dax suffered a 10% weekly loss.
The FTSE in London finished 251 points lower on Friday at 6,998, a 3.5% drop after the war in Ukraine escalated with a Russian attack on Europe’s biggest nuclear power station, Zaporizhzhia, which was then seized by Putin’s forces. The German and French stock markets fell more than 4%, taking the Dax in Frankfurt to its lowest levels since late 2020, while the Italian index tumbled 6.2% to its lowest level in more than a year.
As stock markets slid, investors piled into investments regarded as safer – gold, currencies like the dollar and yen, and government bonds. British 10-year government bonds recorded their biggest weekly rise in more than a decade. As gilts were in demand, this pushed their yields, or returns to investors, down the most since November 2011 (when bond prices go up, yields go down).
The Moscow stock exchange stayed closed all week, while the rouble fell to record lows amid wider sanctions on Russia. It hit an all-time low of 118.35 per dollar in Moscow on Thursday, and ended the week at 105 per dollar.
Sterling lost 1% against the dollar to $1,3210. War in Ukraine has boosted demand for safe-haven investments like the dollar and gold. Spot gold rose 1.5% to $1,965 an ounce.
The euro slipped below the $1.10 level for the first time since May 2020, down 1.4%, after the Russian attack on the Ukrainian power station, Europe’s biggest. The single currency has also been hurt by growing risks to the European economy and the expectation the US Federal Reserve will hike interest rates much faster than the European Central Bank.
Fears of supply disruptions have sent commodity prices soaring. Aluminium has been hitting fresh record highs most days. Three-month aluminium on the London Metal Exchange touched a new all-time high of $3,850 on Friday and was on track for its biggest weekly gain ever, rising 13% so far. Nickel prices rose more than 13% over the week, the biggest weekly rise in August 2019.
Wheat traded in Chicago, the global benchmark, has soared more than 50% since Russia invaded Ukraine over a week ago. Prices rose as high as $13.40 a bushel on Friday.
Michael Hewson, chief market analyst at CMC Markets UK, said:
The global inflation shock has gained momentum this week with wheat prices rising to a 14-year high, corn prices to an 8-year high, and Brent crude prices hitting 10-year highs of $120 a barrel.
The rise in agricultural commodity prices is particularly worrying given that the last time they were at these sorts of levels, we had the Arab Spring in 2012.
Wholesale natural gas prices hit record highs. The UK National Balancing Point (NBP) benchmark soared above 500p a therm at one point, smashing through the previous all-time high set in December amid a prolonged surge that caused the collapse of a series of household gas suppliers.
The Dutch Title Transfer Facility (TTF) for delivery in April, a common benchmark for European gas, hit €200 for the first time, before settling back later in the day.
Global food prices hit a record high in February, jumping 24% year-on-year, according to the UN food agency – even before the Russian invasion of Ukraine.
Here’s a selection of today’s top stories:
Thank you for reading this week. My colleague Graeme Wearden will be back next week. Bye! – JK
Updated
Here is our latest list of western sanctions against Russian oligarchs.
Turning to the UK stock market, Hewson said:
The FTSE 100 has also had a shocker of a week, posting its largest decline since March 2020, and below the 7,000 level to its lowest point since August last year. In terms of weekly performance, the best performers have been in defence, and commodities with weekly gains for BAE Systems, and the likes of Glencore, Rio Tinto and Antofagasta.
Today’s sell-off has been broad based with travel and leisure getting hit hard as surging oil prices push up fuel costs for the airlines, as well as eroding consumers disposable incomes. While some airlines are partially hedged for rising fuel prices none of them are fully hedged. Eastern European based Wizz Air is once again on the receiving end of the heaviest losses.
European banks are getting clobbered over concerns about the economic outlook for the European economy, rising inflation risk, and an ECB likely to remain behind the curve when it comes to raising rates. Amongst the worst performers French bank Société Générale is down over 25% this week, as is Italy’s UniCredit, while Deutsche Bank is down over 20%.
UK banks have also been hit but their weekly losses have been more modest with Barclays down over 15% this week, the worst performer.
Michael Hewson, chief market analyst at CMC Markets UK, has looked at this week in stock markets.
Investors have piled out of European stocks this week, accelerating a decline that began at the end of last month, and has accelerated over the last two days.
This morning’s reckless shelling of a Ukrainian nuclear power plant by Russian forces, shows that Putin is becoming increasingly desperate to obtain a victory in the face of numerous setbacks, and with little sign that he is inclined to back down. If anything, the stubbornness of Ukrainian forces is enraging him further, in turn raising the uncertainty level further.
These actions are a significant escalation and raise the question as to whether Putin could adopt a scorched earth policy in his attempts to crush Ukrainian resistance.
Fears of further escalations, on top of rising inflationary risks putting pressure on European companies’ margins, as well as future profits, and has seen the Dax slide to its lowest levels since December 2020.
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While Boris Johnson has claimed that Britain has been at the forefront of action against Russia, this is the reality.
This indefensible and deeply shaming for the UK. https://t.co/kfHOHkd0wc
— David Clark 🇺🇦 (@David_K_Clark) March 4, 2022
Sainsbury's renames chicken kiev
Sainsbury’s is renaming its chicken kiev to chicken kyiv and pulling a Russian-made vodka from its shelves in the latest action by a British retailer to signal solidarity with the people of Ukraine.
The UK’s second-biggest supermarket said the packaging for the poultry dish would change in the next few weeks, switching the Soviet-era name for the country’s capital for the Ukrainian one.
The move comes after several smaller operators announced a switch to chicken kyiv, including the Better Naked brand and Essex-based Our Local Butcher. Marks & Spencer, which popularised the dish in the UK after making chicken kiev one of the first ready meals in 1979, has also come under pressure to rename the dish.
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John Lewis has become the latest retailer to remove Russian-made products from sale.
The John Lewis partnership is working with suppliers to review products of Russian origin. It will stop selling Russian-made vodka in Waitrose and Russian-made pizza oven pellets in John Lewis department stores.
Gas prices surge, sterling slips, gold rises
Prices for natural gas are surging, while crude oil prices have also picked up again.
British wholesale gas for immediate delivery has hit a record, up 29% to 490p per therm.
Brent crude is trading $4.8 higher at $115.34 a barrel, after rising to $120 earlier following the Russian shelling of a Ukrainian nuclear power station, the biggest in Europe. Russian forces have taken control of it but luckily there is no damage to its six reactors, according to the International Atomic Energy Agency.
US light crude has surged $5.69 to $113.37 a barrel.
Stephen Brennock of oil broker PVM told Reuters:
Russia’s invasion of Ukraine means that fears over supply will remain front and centre.
He said there is a “new sense of urgency” for the west to try and strike a nuclear deal with Iran.
Crude oil prices hit their highest level in a decade this week, rising to $120 a barrel for Brent. Prices are set to post their strongest weekly gains since the middle of 2020, with Brent up 17% and the US benchmark 21% higher.
On the currency markets, sterling has lost 1% against the dollar to $1,3210. War in Ukraine has boosted demand for safe-haven investments like the dollar and gold. Spot gold is up 1% higher on the day, at $1,954 an ounce.
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Wall Street has opened lower, as worries over the escalating war in Ukraine outweighed the strong US non-farm payrolls report.
The Nasdaq has extended its losses to 1% while the Dow Jones opened almost 140 point lower, or 0.4% and the S&P 500 slid 0.6% at the opening bell.
Over here, the sell-off on stock markets continues. The UK’s FTSE 100 has lost 191 points to 7,047, a 2.6% drop, while Germany’s Dax and France’s CAC have slid more than 3% and Italy’s FTSE MiB has tumbled 5%.
James Knightly, chief international economist at ING, echoed those comments:
The US labour market continues to tighten with unemployment now firmly below 4%. Given strong hiring intentions, this will keep upward pressure on pay with the Federal Reserve set to respond with higher interest rates despite uncertainty created by Russia’s assault on Ukraine.
Michael Pearce, senior US economist at Capital Economics, said:
The stronger than expected 678,000 gain in non-farm payrolls in February and upward revisions to previous months gains is another sign that the real economy has considerable momentum, with the Omicron wave having had surprisingly little impact.
That will give the Fed greater confidence to push ahead with its planned policy tightening but, with wage growth now levelling off, there is arguably less pressure for officials to front-load an aggressive series of rate hikes over the coming months.
US jobs growth picks up in February; jobless rate drops to 3.8%
US employers took on 678,000 more workers in February, far more than expected.
The latest non-farm payrolls report from the US Labor Department painted a strong picture of the labour market. Economists had pencilled in a rise of 400,000. The increase in jobs in January was revised higher to 481,000 from 467,000 and December was revised to 588,000 from 510,000.
The unemployment rate dropped to 3.8%, the lowest since February 2020, from 4% in January.
Feb non-farm payrolls +678K vs +420K expected. Unemployment 3.8% (vs 3.9%E). Big change - no wage inflation with avg hourly earnings +0.0% vs +0.5%E. Odds of the Fed raising int rates by +25bp on 3/16 likely don’t change.
— Gary Black (@garyblack00) March 4, 2022
U.S. Unemployment Rate & Labor Status Flows pic.twitter.com/1rAk34dLpr
— Michael McDonough (@M_McDonough) March 4, 2022
British gas jumps 30% to new record
British wholesale gas for April delivery has jumped 30% to a record 455.04p per therm.
If gas prices stay at the current high levels, UK energy household bills – which are rising by 54% in April to an average £2,000 per year under the regulator’s price cap – are likely to go up even more at the next review in October.
JD Sports, Britain’s biggest sportswear chain, has announced that it has ceased all trading in Russia across its brand websites and wholesale channels.
It doesn’t have any stores or employees in either Russia or Ukraine. It is one of a number of companies that have temporarily suspended operations in those countries, including Ikea and the Smirnoff maker Diageo.
It’s not just wheat that is going up in price. The price of pork and other food is likely to rise significantly as a result of the Russian invasion of Ukraine, a UK environment minister has warned.
Victoria Prentis, the Defra minister responsible for farming, also suggested Britons may want to stop buying Russian white fish, which makes up about a third of the volume consumed in the UK.
Prentis warned that British people would have to become more willing to pay premium prices for quality food produced domestically.
The Co-op became the first supermarket yesterday to stop selling Russian-made vodka, followed by Morrisons.
Here is a video showing the Ukrainian nuclear power station under attack earlier today.
The operator of Russia’s Nord Stream 2 natural gas pipeline to Germany has not filed for insolvency, the Russian TASS news agency cited the company as saying on Friday.
There are reports that the Nord Stream 2 gas pipeline project has filed for insolvency.
This comes after the German chancellor Olaf Scholz halted certification of the controversial project a week and a half ago, the day after Vladimir Putin recognised the self-proclaimed separatist republics in Luhansk and Donetsk in east Ukraine and ordered troops into the area.
First announced in 2015, the $11bn (£8.3bn) pipeline owned by Russia’s state-backed energy giant Gazprom has been built to carry gas from western Siberia to Lubmin in Germany’s north-east. It would have doubled the existing capacity of the Nord Stream 1 pipeline and kept 26m German homes warm at an affordable price.
⚡️⚡️«Nord Steam 2 AG» filed for bankruptcy. There will be no more Nord Stream 2.
— NEXTA (@nexta_tv) March 4, 2022
NORD STREAM 2 HAS FILED FOR INSOLVENCY - TASS
— First Squawk (@FirstSquawk) March 4, 2022
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As reported earlier, Russian elites could have their property seized and handed over to Ukrainian refugees, Britain’s deputy prime minister has suggested.
Dominic Raab made the remarks as he defended the UK’s response to Moscow’s invasion of Ukraine and the prime minister, Boris Johnson, called for an emergency UN summit after a Russian attack on a nuclear power station in Ukraine.
Asked on LBC radio whether Britain could capture property assets owned by Russian oligarchs in punishment for Moscow’s invasion on Ukraine, Raab said: “If we’ve got the evidence and the legal basis, then we’ll do it.”
Here is our full story on the London Stock Exchange suspending the remainder of Russian-linked firms, and a British independent director resigning from the board of Evraz, the steel and mining group in which Roman Abramovich holds a 29% stake.
The travel giant Tui has announced that Vladimir Lukin has resigned from its board.
Lukin has also terminated his relationship with Russia’s Severgroup, where he acted as special adviser to the chief executive. Lukin is a Russian politician, a former Human Rights Commissioner of Russia and a former president of the Russian Paralympic Committee, and served as the Russian Ambassador to the United States from 1992 to 1994.
Severgroup is owned by Alexey Mordashov, a Russian oligarch who quit Tui’s board earlier this week. Mordashov, a metals magnate and one of Russia’s richest men, is the chairman of Severstal, one of Russia’s biggest steel producers.
Mordashov is also Tui’s single largest shareholder with a 34% stake, and this stake has been frozen as he is under sanctions from the EU, targeting individuals with close ties to the Russian president Vladimir Putin.
Updated
European shares tumble, commodity prices soar
European shares are sliding deeper into the red, after Russian shelling at a Ukrainian nuclear plant – Europe’s biggest nuclear power station – led to a fire that burned for several hours, before being extinguished. The reactors are fine, according to the Ukrainian authorities, but this illustrates the dangers to a nuclear plant in a military conflict and has caused deep unease at the International Atomic Energy Agency. Putin’s forces have seized the power station.
- UK’s FTSE 100 down 109 points, or 1.5%, at 7,129
- Germany’s Dax down 273 points or 2%, at 13,423
- France’s CAC down 125 points, or 2%, at 6,249
- Italy’s FTSE MiB down 606 points, or 2.5%, at 23,357
The Moscow stock exchange has been shut all week. The Russian rouble has weakened 2.35% to 108.70 per dollar, after hitting 116p per dollar, near a record low.
This video clip went viral last night:
A snapshot of the Russian economy: an investment expert goes live on air and says his current career trajectory is to work as "Santa Claus" and then drinks to the death of the stock market. With subtitles. pic.twitter.com/XiPVTSUuks
— Peter Liakhov (@peterliakhov) March 3, 2022
On the commodities markets, Brent crude is trading at $110.84 a barrel, up 0.3%, while US light crude is at $108.44 a barrel. Oil prices are set for their strongest weekly gain since mid-2020.
British wholesale natural gas for next-day delivery is nearly 3% higher at 395p per therm, after approaching December’s record high of above 450p earlier this week. The Dutch futures contract has hit record highs in recent days above €185 per megawatt hour and is currently nearly 4% higher at €167.
Commodity markets are on track for their biggest weekly gains in years after the shuttering of Ukrainian ports, fighting in several major cities and widening sanctions against Russia led buyers of oil and gas, crops and metals to look for alternatives.
Russia and Ukraine together account for just under 30% of global wheat supplies, and Russia is a major exporter of oil, gas, aluminium, nickel and other metals.
The Chicago Board of Trade’s most-active wheat futures contract has climbed 40% this week, the biggest weekly gain on record, while corn is 16% ahead and soybeans have added 5%.
Analysts at ED&F Man Capital Markets said:
We are seeing the commodity ‘melt-up continue with no sign of a let-up.
This is obviously grim news for people around the world, who are likely to have to pay more for their household energy and food in coming months. Higher oil and prices will translate into higher transport and production costs, pushing up all goods prices.
Photograph: Valentyn Ogirenko/Reuters
Updated
Richard Hunter, head of markets at the investment firm interactive investor, said
Risk assets lurched lower once more following reports of an attack on a nuclear plant in Ukraine, while commodities continued their rise amid the inflationary impacts of the conflict.
Oil spiked to almost $120 per barrel on the news before settling back to around $112 – but still up by 44% in the year to date – as news emerged that an increase in output following a deal between the US and Iran is not close to materialising. Meanwhile, there were further spikes in commodities such as nickel, copper and aluminium as the escalation of sanctions on Russia threatened general supply chains.
The current turmoil leaves central banks somewhere between a rock and a hard place. The Federal Reserve , for example, needs to weigh the likely economic damage to growth against the inflationary pressure of commodities. Chairman Powell indicated earlier in the week that an interest rate rise of 0.25% rather than 0.5% was imminent, which was initially of comfort to investors, but has added that it was “too early to say if Russia changes the rate path.”
Further confirmation of a recovering US economy is expected later in the form of the monthly non-farm payrolls report, although this lagging indicator does not encompass the current impacts of the tensions.
The limited appetite for risk assets is clearly shown by the performance of the major indices. In the year to date, the Dow Jones is now down by 7%, the S&P 500 by 8.5% and the Nasdaq by 13.5%.
The FTSE 100 is certainly not immune from the global uncertainty, but the latest round of tensions has sent the index into negative territory for the year. The UK’s premier index had steadfastly been clinging to small gains, propelled by its defensive nature, peppering of inflation-proof stocks, and a large exposure to the oil and mining sectors. However, after another weak opening in early exchanges, the FTSE100 now stands down by 2.7% in the year to date.
British deputy prime minister Dominic Raab said that Britain will seize the properties of Russian oligarchs if there is the legal basis to do so.
Speaking on LBC Radio, Raab said:
If we’ve got the evidence and there is the legal basis, we’ll do it.
Asked if he would support using such properties to Ukrainian refugees, he said:
Yes, absolutely, we’re looking at everything in the round.
Britain has been criticised for being slow to apply sanctions to pro-Putin Russian oligarchs, while Germany and France seized two yachts owned by Russian billionaires in recent days.
Here’s a round-up of today’s other main stories so far.
Britain’s economic growth will halve this year as a result of soaring inflation, hefty tax rises and the destabilising shock from the war in Ukraine, a leading business lobby group has warned.
In the first major forecast of the UK economy since the Russian invasion of Ukraine, the British Chambers of Commerce (BCC) said it expected an inflation rate of 8% to cut disposable incomes in 2022, putting the brakes on the recovery from the pandemic.
The UK has sanctioned two new billionaire allies of Vladimir Putin, amid growing pressure to speed up the crackdown on Russian oligarchs, with delays blamed on legal issues and poor preparation.
Amid widespread criticism of the delays to sanctioning more Kremlin allies, the Guardian understands ministers are set to reform “intimidation lawsuits” to crack down on multimillion legal bills from oligarchs.
The oligarchs Alisher Usmanov and Igor Shuvalov were added to the UK sanctions list on Thursday night, a week after it was announced there would be a “hitlist” of more than 100 oligarchs. Both will be cut off from their multimillion pound British mansions, with a full asset freeze and travel ban.
Sajid Javid has said the NHS in England must stop using energy supplied by the Russian-owned firm Gazprom.
European stocks have slid at the open.
- UK’s FTSE 100 down 46 points, or 0.67%, at 7,191
- Germany’s Dax down 1.4%
- France’s CAC down 1%
- Italy’s FTSE MiB down 1.35% at 23,632
- Spain’s Ibex down 0.3%
LSE suspends remainder of Russian firms
The LSE’s move to suspend eight more stock listings means that all 36 companies with strong Russian links are now suspended from the London market. It suspended global depositary receipts, which represent shares in a foreign company.
It said it was taking the action “in light of market conditions, and in order to maintain orderly markets”.
The LSE added state-owned Federal Grid, Russia’s largest transmission company, the telecoms provider Rostelecom, the residential property developer Etalon, the supermarket chain O’Key, the fertiliser company Acron, the food retail chain Magnit, investment firm Sistema and the commercial seaport Novorossiysk to its list of companies barred from trading in London.
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Introduction: Shares tumble after attack on Ukraine nuclear plant
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Shares have tumbled after a fire burned for several hours at Ukraine’s Zaporizhzhia nuclear plant, the largest of its kind in Europe, following shelling from Russian forces. It was later put out and Ukrainian authorities said the reactors were safe. The International Atomic Energy Agency said the fire had not affected “essential” equipment. However, the incident underlined the dangers to a nuclear plant in the midst of a conflict. Reuters reported that Russian forces have seized the power station, citing Ukrainian authorities.
Major stock indices in Asia fell sharply, with Japan’s Nikkei closing 2.2% lower and Hong Kong’s Hang Seng losing 2.7%. European markets are expected to open lower again, after heavy losses in recent days. The Moscow stock exchange will stay shut for a fifth day.
The international benchmark Brent crude jumped above $114 a barrel but later retreated to just under $112 a barrel, up 1.3% on the day.
The head of the IAEA, Rafael Mariano Grossi, said he was “deeply concerned” about the situation at the nuclear plant.
I'm deeply concerned with situation at #Zaporizhzhia Nuclear Power Plant. Spoke with #Ukraine PM Denys Shmygal; @IAEAorg's monitoring and in close contact with #Ukraine's nuclear regulator and operator. I appeal to parties to refrain from actions that can put NPPs in danger.
— Rafael MarianoGrossi (@rafaelmgrossi) March 4, 2022
Russia’s week-long invasion of Ukraine has sparked a rally in commodities prices amid fears of supply disruption. Wheat prices hit a fresh 14-year high yesterday, with Chicago futures closing almost 22% higher at $12.89 a bushel. In Asia today, Chinese wheat prices jumped 6% to an all-time high of 3,595 renminbi a metric tonne.
Aluminium, which has hit several fresh record peaks this week, is heading for the biggest weekly gain on record, up more than 13% so far, as fears of supply disruption deepened. The metal touched an all-time peak of $3,850 a tonne this morning. Benchmark nickel rose 2.7% and hovered close to a seven-year high of $27,976 a tonne touched on Thursday. Russia is a major producer of both metals, wheat and other commodities.
James Rutherford has resigned from the board of Evraz, the London-listed steel and mining group in which Roman Abramovich holds a 29% stake. The news comes a day after the Institute of Directors urged British directors to stand down from the boards of Russian companies.
The London Stock Exchange has suspended the stock listings of several more Russian-based companies, including Sistema and Magnit, after suspending 27 yesterday.
The Agenda
- 9am GMT: Italy GDP for fourth quarter (final)
- 9am GMT: UK New car sales
- 9.30am GMT: UK Construction PMI
- 10am GMT: Eurozone retail sales for January
- 1.30pm GMT: US Non-farm payrolls for February (forecast: 400,000)
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