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28/02/22 Briefing


Day Ahead

US (14:30 CET) Wholesale inventory for Jan expected at 1.2% MoM

Market News

The Bank of Russia raised its key rate to 20% from 9.5% citing "cardinal" changes in the economy. Governor Elvira Nabiullina will make a statement at 4 p.m. Moscow time. The ruble fell 8% at the open, immediately hitting the trading limit of 90 per dollar. The currency was indicated 26% weaker in offshore trading. Russia introduced mandatory FX sales for companies and the central bank temporarily banned non-residents from selling securities. The dollar rose against virtually every peer, with Nordic currencies leading losses among the G-10.

Ukraine officials agreed to meet Russian counterparts at the Belarus border, hours after Vladimir Putin put Russia's nuclear forces on higher alert and as Russian forces advanced into Ukraine's second-largest city. Belarus is preparing to send soldiers to Ukraine in support of Russia, the Washington Post reported. Ukraine's Volodymyr Zelenskiy voiced skepticism that talks would yield results but said he's willing to try.

Oil, palladium and wheat surged more than 5% amid heightened concerns the conflict would disrupt commodity supplies. European shares and U.S. equity futures tumbled, while Asian stocks fluctuated. Treasuries, other sovereign bonds and gold rose.

The U.K. banned citizens from dealing with the Russian central bank. Germany will supply Kyiv with weapons and massively boost its own defense spending, two historic shifts. EU foreign ministers endorsed a plan to ban all transactions involving Russia's central bank. The bloc will close European airspace to Russian aircraft, and will ban state-owned media firms Sputnik and RT. It will send 450 million euros in military aid to Ukraine for weapons. It may sanction some of Russia's tycoons. It'll debate its response today to U.S. proposals for a coordinated release of emergency oil reserves.

Norway started the process to drop Russian assets from its sovereign wealth fund. New York City's pension system will weigh the divestment of Russian holdings. Beijing attempted to distance itself from Moscow. Still, China abstained from a vote on a UN Security Council draft resolution - vetoed by Russia - that condemned the invasion. Emmanuel Macron will meet Olaf Scholz and Ursula Von Der Leyen. Biden will speak with allies at 11:15 a.m. ET. And the Security Council voted to hold today an emergency session of the General Assembly, the first time in decades.

BP's getting out of Russia. The oil major will exit its roughly 20% shareholding in Rosneft, one of the single biggest foreign investments in the country, and will take a hit of up to $25 billion. The surprise move followed pressure from the U.K. The invasion of Ukraine led BP to conclude "that our involvement with Rosneft, a state-owned enterprise, simply cannot continue," Chairman Helge Lund said. BP didn't say whether it's planning to sell the stake, or simply walk away.

Iraq halted oil output at two fields that can pump almost half a million barrels a day between them in outages unrelated to Ukraine. Traders were already assessing disruptions to oil and gas flows and a maritime crisis that has seen at least three merchant ships hit. Forces struck an oil storage site and gas pipeline in Ukraine over the weekend. OPEC+ will probably stick to its plan of only gradually boosting output when it meets this week, several delegates said.

Money is still flowing into U.S. stocks at a steady pace, but the cash is arriving in a market where liquidity is evaporating. That's part of the explanation for dizzying volatility, including intraday swings of 3% and more. Equity liquidity has slumped to levels seen only three times in the last 15 years, Goldman said.

The risky 'razor blade' trade is back. An army of pandemic-era retail investors is powering the boom and regulators are worried that amateur traders don't understand the risks. What's the draw to these ETFs? These risky bets offer the chance to reap big returns fast.

For investors seeking to retain a foothold in Europe, the U.K. is being touted as a haven in an environment of rising geopolitical risks. The FTSE 100 has risen about 1% this year, outperforming major regional indexes from the S&P 500 to the Euro Stoxx 50 and Nikkei 225. The benchmark has benefited from its heavy exposure to energy, miners and financials, and a low exposure to tech.

Economic Outlook

Excluding Russian lenders from SWIFT may lead to missed payments and giant overdrafts within the international banking system, and prompt authorities to reactivate daily operations to supply the market with dollars, said Credit Suisse strategist Zoltan Pozsar. Drawing comparisons with the 2008 Lehman failure and the pandemic-related market seizures of March 2020, Pozsar warned that "central banks should stand ready to make markets." Here's what investors are saying.

Overview

FTSE 100 - 7,372.57 (-1.5605%) DJ - 34,058.75 (2.513%) S&P500 - 4,384.65 (2.2373%) Nasdaq - 13,694.62 (1.6405%) EStoxx50 - 3,846.18 (-3.1357%) HSI - 22,713.02 (-0.2379%) Nikkei - 26,526.82 (0.1901%)

Currencies

GBPUSD - 1.3375 (-0.2536%) GBPEUR - 1.1964 (-0.5266%) EURUSD - 1.1179 (-0.7721%) EURCHF - 1.0321 (1.0929%) USDCAD - 1.2765 (-0.4074%) EURAUD - 1.5526 (0.3884%) EURSEK - 10.6538 (-0.6326%) EURNOK - 9.9583 (-0.0181%)

Commodities

GOLD - 1,901.36 (0.6378%) SILVER - 24.321 (0.2015%) COPPER - 452.20 (0.8584%) PALLADIUM - 2,496.21 (5.408%) CRUDE - 96.06 (4.9132%) BRENT - 102.16 (4.3194%)

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The S&P 500 futures are up 3 points and are trading % above fair value. The Nasdaq 100 futures are up 9 points and are trading roughly in-line with fair value. The Dow Jones Industrial Average futures