Russia has warned European gas prices will more than double after Germany slammed the brakes on the Nord Stream 2 pipeline.
In a barbed response, former Russian President Dmitry Medvedev threatened a “brave new world” where Europeans would pay €2,000 for 1,000 cubic metres of natural gas.
Benchmark European prices are currently trading at around €79 euros per megawatt-hour, equal to about €830 euros per 1,000 cubic metres.
Germany had been reluctant to include Nord Stream 2 in sanctions as the move would hurt its own gas supplies. However, Chancellor Olaf Scholz said Russia had gone a step too far and the project should not be approved.
05:49 PM
Facebook accused of ‘flagrant’ compliance breaches
Facebook has been accused of “serious and flagrant” compliance failures after it was fined for not telling competition regulators about crucial executive appointments. James Titcomb reports:
The Competition and Markets Authority (CMA) said that Meta, Facebook’s recently rebranded parent company, had “deficiencies in [its] compliance processes” and that HR staff were overworked to the extent that the business struggled to keep track of its own employees.
The CMA fined Meta £1.5m earlier this month, saying the company had breached an order requiring it to ring fence Giphy, the animated Gif library it bought in 2020.
The regulator last year ordered Meta to sell Giphy, and fined it this month for not reporting key staff moves. It had earlier fined Meta £50m for failing to provide regular updates.
05:31 PM
Boss of Indian bank donates $530,000 worth of shares to driver and home helpers
The chief executive of IDFC First Bank, a private sector lender in India, has gifted $530,000 (£389,900) worth of the shares he owns to his driver, trainer, and helpers at home and office in an unusual gesture of philanthropy in India.
V. Vaidyanathan gave away 900,000 shares or 3.7pc of his holding. The recipients will use the funds to buy homes, according to an exchange filing.
Vaidyanathan, 54, has gifted roughly 38pc of his stake over the past few years. That includes a 2020 gift to his former mathematics teacher, who had lent Vaidyanathan 500 rupees when he was a broke student who had won admission into a premier school but didn’t have the cash to travel to the institute.
Another 200,000 shares were sold by a welfare trust to fund its social activities.
05:11 PM
FTSE 100 closes higher
Global stock markets have tumbled today while bonds and commodities rallied after Russian President Vladimir Putin ordered troops into the breakaway regions of eastern Ukraine.
However, the FTSE 100 swung back to the green, closing 0.1pc higher at 7,494.
Smith & Nephew topped the risers with a 7.5pc jump following an update this morning, while Russian miners Evraz and Polymetal rebounded strongly as the prospect of a full-scale set of sanctions on them faded.
Elsa Lignos at RBC Capital Markets said: “The short-term market reaction will depend on the extent of sanctions imposed by the West. Western leaders have two options – a ‘modest’ approach, trying to signal de-escalation (what markets ‘want’ to see) or a firmer approach, recognising that allowing Putin to dismantle Ukraine piece by piece will still achieve his end goal, over a longer timeframe.”
04:52 PM
Mishcon de Reya picks chairman ahead of float
Mishcon de Reya has named a chairman for a new holding company as it forges ahead with plans to become the UK’s largest publicly-traded law firm, in an initial public offering this year that could value it at £750m.
The firm has picked Pat Butler, chairman of lender Aldermore, to chair the board. A former McKinsey & Company executive, Butler sits on the boards of insurance broker Ardonagh Group and Hikma Pharmaceuticals.
Mishcon will in addition hand executive coaches Rachel English and Pavita Cooper, and Anna Troup, an elite runner who sits on the board of the Pension Protection Fund, non-executive roles. English has served on the board of Acacia Mining, while Cooper has previously worked at Barclays and Lloyds.
Kevin Gold, Mishcon’s executive chair, will become chief executive.
04:34 PM
Boots to sell Covid lateral flow tests
Pharmacy chain Boots will sell Covid lateral flow tests after the UK Government’s announcement to stop providing free kits from April 1st.
Prices will start at £2.50 per test and will be available in stores from early March.
From tomorrow, customers can purchase a pack of four for £17, or one test for £5.99 on the retailer’s online platform.
Asif Aziz at Boots UK said: “We are pleased to be expanding our COVID-19 testing services even further, with affordable lateral flow testing options for those who still want peace of mind from asymptomatic testing after 1 April. “
04:16 PM
Private equity giant KKR to acquire majority stake in bottling company Refresco
Private equity giant KKR has agreed to buy a majority stake in bottling company Refresco from PAI Partners and British Columbia Investment Management, which will retain a “significant” minority holding.
The deal values the bottler at about €7bn (£5.8bn), Bloomberg reported.
Refresco helps brands produce everything from ready-to-drink teas to juices and beer. It has over 70 sites in Europe and North America and over 10,000 employees.
04:06 PM
Handing over
That’s all from me – thanks for following along on a dramatic day. Giulia Bottaro will take things from here.
03:48 PM
US consumer confidence drops to five-month low
US consumer confidence dropped to its lowest since September last month as expectations for growth and financial prospects softened amid sky-high inflation.
The Conference Board’s index decreased to 110.5 in February from a downwardly revised 111.1 reading the month before.
Americans are experiencing the highest inflation since the early 1980s, which is well outpacing wage growth.
The Russia-Ukraine conflict may further take a toll on confidence, especially if gasoline prices continue to rise, and surging mortgage rates are making housing that much less affordable.
03:42 PM
What’s happened with sanctions?
If you’re catching up on this afternoon’s developments, we’ve got a rundown of the UK’s first “barrage” of sanctions against Russia.
Simon Foy has the details: What sanctions the UK has imposed on Russia
03:34 PM
UK warns of cyberattacks as crisis escalates
The UK has warned of potential cyberattacks with “international consequences” after Russia stepped up its assault on Ukraine.
The National Cyber Security Centre (NCSC) – part of GCHQ – called on British organisations to “bolster their online defences” after Moscow moved troops into its neighbour.
“While the NCSC is not aware of any current specific threats to UK organisations in relation to events in and around Ukraine, there has been an historical pattern of cyber attacks on Ukraine with international consequences,” it said in a statement.
Last week, Ukranian banking and government websites were briefly knocked offline by a spate of distributed denial of service (DDoS) attacks which the US and Britain said were carried out by Russian military hackers.
03:29 PM
Volkswagen revs up plans to spin off Porsche
Volkswagen is drawing up plans to list Porsche on the stock market in a blockbuster move that will help fund its push into electric cars.
Howard Mustoe reports:
The German car giant said it was in “advanced talks” with its billionaire owners to spin off Porsche in a long-rumoured move that requires the agreement of the family-owned holding company Porsche SE.
Volkswagen is banking on the idea that the Porsche brand will be valued more by investors as a separate entity. That proved to be the case when Ferrari was listed in 2016 by Fiat Chrysler, which is now called Stellantis.
The Italian sports car maker is worth €37bn, while Stellantis is worth €51bn for the Peugeot, Citroen, Fiat, Chrysler, Vauxhall, Opel and Maserati brands combined.
VW is worth about €116bn, while Porsche alone could be worth at least €100bn, according to analysts.
Read Howard’s full story here
03:12 PM
Expert reaction: Conflict fuels inflation conundrum
Jamie Maddock, an analyst at Quilter Cheviot, says Russia’s actions will add to the energy crisis and the inflation conundrum.
Russia’s aggression in eastern Ukraine has sent oil prices tantalising close to the $100 per barrel mark, and it is likely just a matter of time before this barrier is breached.
Geopolitical events can cause oil prices to be volatile and this will be a concern for businesses and consumers alike given where inflation currently sits. Prices have risen sharply and although signs are there that this is beginning to broaden out, higher oil and gas prices will do nothing to alleviate the stickiness of this inflation.
It is also interesting to see Germany halt approval of the Nord Stream 2 gas pipeline from Russia. While Germany looks for alternatives this will take time and ultimately push prices up further across the continent.
In the short-term, the oil and gas companies will continue to benefit from prices remaining elevated for some time. Ordinarily the independents would benefit more so than the majors from the high oil and gas/LNG prices, but given the low leverage and high and growing dividends from the majors, investors looking to benefit from rising oil and gas prices may find they offer an appealing balance.
02:57 PM
Nickel jumps to 10-year high
Nickel has surged to its highest in more than a decade as Ukraine tensions spark turmoil in commodities markets.
Russia is a key producer of the alloy, which is used in stainless steel and rechargeable batteries. It’s already been on the rise amid surging demand from the electric vehicle industry, but the latest geopolitical tensions have spurred fears of potential disruption.
Prices rose as high as $25,000 per tonne for the first time since 2011 before easing back slightly.
02:39 PM
Wall Street opens lower as tensions rattle markets
Wall Street’s three main indices fell at the opening bell as rising tensions and new sanctions continue to rattle markets.
The S&P 500 fell 0.4pc, while the Dow Jones was down 0.3pc. The tech-heavy Nasdaq dropped 0.9pc.
02:21 PM
UK lines up block on Russian sovereign debt
Britain will introduce a block on Russia issuing sovereign debt on London’s markets if it does not pull back from Ukraine.
In a statement outlining potential future sanctions, the Foreign Office said: “Should Russia not de-escalate, the UK will shortly introduce legislation which will, amongst other steps, prevent Russia from issuing sovereign debt on UK markets.”
02:13 PM
EU proposes first set of sanctions
After Britain tabled a raft of sanctions against Russia, the EU has outlined plans for its own crackdown.
Its measures target:
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351 politicians in the Russian state Duma who voted to recognise separatist regions in eastern Ukraine, plus another 11 Russians who proposed the recognition.
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Three Russian banks that finance military or other operations in the separatist-controlled regions of eastern Ukraine: VEB.RF, Rossiya and Promsvyazbank (these last two were also sanctioned by the UK).
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Restrictions on Russian government to access EU capital and financial markets and services.
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Trade from the two breakaway regions to and from the EU.
Member states still need to formally approve the sanctions.
Russia’s aggression against Ukraine is illegal and unacceptable.
The Union remains united in its support for Ukraine’s sovereignty and territorial integrity.
A first package of sanctions will be formally tabled today.
— Ursula von der Leyen (@vonderleyen) February 22, 2022
01:59 PM
Medvedev threatens ‘brave new world’ of gas prices
Former Russian President Dmitry Medvedev has warned European gas prices will surge after Germany blocked the approval of the Nord Stream 2 pipeline.
Mr Medvedev, now deputy chairman of Russia’s security council, threatened a “brave new world” where Europeans would pay €2,000 for 1,000 cubic metres of natural gas.
Gas prices in Europe and the UK have both jumped 10pc after German Chancellor Olaf Scholz said he couldn’t approve the controversial new gas link.
German Chancellor Olaf Scholz has issued an order to halt the process of certifying the Nord Stream 2 gas pipeline. Well. Welcome to the brave new world where Europeans are very soon going to pay €2.000 for 1.000 cubic meters of natural gas!
— Dmitry Medvedev (@MedvedevRussiaE) February 22, 2022
01:43 PM
Bill Browder: Russia sanctions ‘pretty tepid if you ask me’
Arch-Kremlin critic Bill Browder has weighed in on the UK’s sanctions against Russia, saying they were “pretty tepid if you ask me”.
The financier, who describes himself as Putin’s No. 1 enemy, questioned why other major banks such as VTB and Sberbank hadn’t been included on the list, as well as the “other 50 oligarchs”.
Read more: Bill Browder: Why I never fly over Russian airspace – and nor should you
BREAKING: The UK is sanctioning 5 Russian banks (Rossiya Bank, IS bank, General Bank, Promsviazbank, Black Sea bank) and 3 oligarchs: Igor and Boris Rotenberg, and Gennadiy Timchenko. Pretty tepid if you ask me. The oligarchs have been on the US sanctions list since 2018
— Bill Browder (@Billbrowder) February 22, 2022
01:38 PM
Evraz shares jump as it dodges sanctions
Investors in Evraz have breathed a sigh of relief after the mining giant dodged the UK’s initial raft of sanctions.
Shares had fallen this morning amid fears the company, in which Roman Abramovich holds an almost 30pc stake, could be targeted be tough economic measures.
But these failed to materialise, sending shares up 5.2pc to the top of the FTSE 100.
FTSE 250-listed Petropavlovsk, which had dropped as much as 11pc, pared losses to trade down 4.3pc.
01:13 PM
Wizz Air vows to keep flying to Ukraine
Wizz Air will keep flying to Ukraine despite Vladimir Putin’s decision to move Russian troops into parts of the country in a decision that sets it apart from many other western airlines.
Oliver Gill has more:
The London-listed budget carrier said Ukraine remains “an important part of our growth plans” and would continue running a normal schedule to the country.
Germany’s Lufthansa and Swiss Air suspended flights to Ukraine over the weekend amid safety concerns for passengers and crew. Dutch flag carrier KLM has also stopped services to the country and British Airways halted flights last summer.
Ryanair has scaled back its services to Ukraine. Michael O’Leary, its chief executive, said it had a duty to fly to Ukraine as long as war had not broken out. It is yet to confirm whether it will now suspend flights.
He said last week: “Is it our duty and obligation… to support the people of Ukraine as long as there is no war or missiles flying there.”
Wizz said on Tuesday that flights will go ahead as normal.
01:08 PM
Sanctions ‘don’t target banks that really matter’
If markets aren’t reacting much to the sanctions, it’s probably because Britain has decided not to target some of the country’s biggest assets.
Bloomberg’s Javier Blas says VTB, SberBank and Gazprombank are the Russian banks that really matter for oil and gas trading, but they’re not targeted. Neither is Gazprom itself.
Critics are likely to argue that Boris Johnson’s initial sanctions don’t go far enough. But the Prime Minister said it was vital to hold further measures in reserve, adding he’d have no hesitation in using them if necessary.
For now, the West isn’t targeting the 3 state-owned Russian banks that really matter for the oil, gas and other commodity trade: VTB, SberBank, Gazprombank https://t.co/MC6KCuP4o5
— Javier Blas (@JavierBlas) February 22, 2022
12:59 PM
Markets shrug off UK sanctions
There’s been very little market response to Britain’s sanctions against Russia, with investors left somewhat underwhelmed by the measures.
The FTSE 100 is still up 0.3pc after reversing its earlier losses. The pound has extended its fall against the dollar, dropping 0.5pc to $1.3546, though the fall is being driven largely by a rush to safe haven assets and interest rate expectations.
Gas prices are still flying after Germany said it’s halting the Nord Stream 2 pipeline, while oil has fallen back from its highs and is currently trading at around $97.50.
Markets are generally holding up after Ukrainian president Zelensky said that there will be no war with Russia and economic sanctions (so far) have been relatively mild.
Still a fluid situation, but traders see a chance of avoiding outright war.
— Matt Weller CFA, CMT (@MWellerFX) February 22, 2022
12:48 PM
Who’s been sanctioned?
Boris Johnson said the Government is using “new and unprecedented powers” to target Russia with sanctions.
The sanctions target the following banks:
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Rossiya Bank
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IS Bank
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General Bank
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Promsvyazbank
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Black Sea Bank
They’ll also target three high-net worth individuals, whose assets held in the UK will be frozen and who will be banned from travelling to the country.
These are Gennady Timchenko, as well as Boris and Igor Rotenberg.
12:40 PM
PM: This is ‘first tranche’ of sanctions
The Prime Minister said the measures represented a “first tranche” of sanctions against Russia and that Britain was ready to go further if needed.
He said that Vladimir Putin’s venture in Ukraine must fail.
12:39 PM
UK sanctions five Russian banks
Boris Johnson confirms that Britain will sanction five Russian banks in response to the crisis. It is also rolling out measures against three individuals.
12:36 PM
Boris Johnson: We won’t give up on diplomatic methods
Boris Johnson has said that the West will continue to pursue a diplomatic solution to the Ukraine crisis.
But he warns we have to be ready for President Putin to plough ahead with his offensive regardless.
We must “brace ourselves” for the next stage of Putin’s plan, he adds.
12:32 PM
UK to outline Russia sanctions
Prime Minister Boris Johnson has just stood up in the House of Commons to outline details of new sanctions against Russia.
He says Russia’s actions amount to a “renewed invasion” of Ukraine, adding that Vladimir Putin was establishing a pretext for a full-blown conflict.
12:31 PM
Wall Street set to slide at the open
It’s set to be a negative start for Wall Street this afternoon as markets grapple with the latest developments in the Russia-Ukraine crisis.
Futures tracking Wall Street’s three main indices fell 1pc before recouping some of their losses.
The S&P 500 and Dow Jones fell 0.2pc, while the Nasdaq lost 0.6pc.
12:28 PM
What will the Russian sanctions look like?
We’re expecting an announcement from Boris Johnson imminently outlining the details of sanctions against Russia.
Here’s a handy guide from my colleague Simon Foy on which companies could be affected by the measures, and what sort of impact they could have.
What sanctions the UK could place on Russia
12:22 PM
Gold dips below $1,900 as rally stalls ahead of sanctions
Gold has dipped below $1,900 an ounce as demand for the safe haven asset waned ahead of fresh sanctions from the UK and EU.
The precious metal had surged to an eight-year high earlier in the day, but the gains eased alongside a wider pause in markets as traders took stock of the latest developments in Ukraine.
Ole Hansen, head of commodities strategy at Saxo Bank, said: “Gold’s rally has paused ahead of a heavy layer of resistance in the $1,917/23 area with momentum not strong enough to take it through at this stage.
“We probably have a fair amount of risk premium priced in which normally doesn’t tend to stick around for a prolonged period of time.”
All eyes will now be on the announcement of sanctions against Russia to give an indication of how strongly the West will react to Russian aggression.
12:18 PM
RAC: Ukraine crisis will push fuel prices even higher
Fuel prices may already be at a record high, but escalating tensions in Ukraine mean it’s going to cost even more to fill up at the pumps.
That’s according to the RAC, which warned forecourt prices would escalate even further as retailers pass on the costs from higher wholesale prices.
The average price of petrol hit a new record of 149.12p per litre on Sunday, while diesel hit 152.58p. Crude oil is now closing in on $100 a barrel amid mounting concerns of a war in Ukraine.
Simon Williams at the RAC said the crisis was “already causing oil prices to rise and will undoubtedly send fuel prices inexorably higher towards the grim milestone of £1.50 a litre”.
He added: “The price of oil is likely to go above $100 and stay there on the back of traders fearing future disruptions in supply.”
12:10 PM
EU: Halt to Nord Stream 2 won’t affect gas supplies
Germany’s decision to halt Nord Stream 2 won’t affect gas supplies to Europe as the pipeline isn’t yet in operation, the EU has said.
A spokesman for the European Commission said: “Nord Stream 2 is not yet functioning, is not supplying energy to Europe.
“It’s not a different source of energy, it’s a different pipeline for an existing supplier… There’s no change in the current situation.”
Meanwhile, German Vice-Chancellor and Economy Minister Robert Habeck said Germany’s gas supply was secured even without Nord Stream 2, which would have doubled flows of gas from Russia.
But he admitted the move would contribute to further price rises.
12:02 PM
BoE’s Dave Ramsden: Interest rate vote was ‘finely balanced’
Meanwhile, there’s fresh scrutiny over interest rate rises on the markets this morning following surprisingly dovish comments from a key Bank of England official.
Dave Ramsden, who was one of four officials to vote for a larger 50 basis point rise this month, said his vote was “finely balanced”. This prompted traders to scale back bets on a half-percentage point increase in March.
Mr Ramsden said the Bank was facing its biggest challenge on inflation since it gained independence in 1997.
Still, he also said there was only a need for a further “modest” tightening of monetary policy in the coming months and pushed back against expectations of aggressive interest rate increases.
11:36 AM
Russian troops roll into Ukraine
In case you missed it, here’s footage from earlier showing tanks rolling into Donetsk after Russian President Vladimir Putin recognised the independence of two separatist-held regions.
These are the images that are rattling both markets and global leaders today, as fears mount that a full-blown invasion is only a matter of time.
11:23 AM
HSBC takes $500m hit from Chinese property crisis
My colleague Lucy Burton has delved a bit more into HSBC’s results this morning. Here’s the latest:
HSBC’s exposure to the Chinese property market has led to the banking giant taking a $500m (£368m) hit against the potential fallout from the crisis that has rocked the sector.
The bank, which makes most of its money in Asia, said that the charge would cover an “increase in allowances to reflect recent developments in China’s commercial real estate sector”.
Developers such as Evergrande, the Chinese property behemoth, have defaulted under the weight of debt payments in recent months and upended the country’s property sector. HSBC last year insisted that it expected no material fallout from the saga surrounding debt-riddled Evergrande.
The London-based bank is placing all of its bets on growth in Asia and has been moving top executives from London to Hong Kong, where it was founded in 1865 to support international trade between China and Europe.
11:19 AM
Germany halts Nord Stream 2 pipeline
Germany has slammed the brakes on the approval process for the Nord Stream 2 pipeline after Vladimir Putin pushed troops into Ukraine.
German Chancellor Olaf Scholz said certification of the controversial gas link couldn’t go ahead, describing Russia’s actions as a “serious breach of international law”.
The Nord Stream 2 pipeline, which runs between Russia and Germany, has been the source of much controversy, with the US and some EU member states warning it would increase Europe’s reliance on Moscow for energy.
Germany had been reluctant to include it in any sanctions, as the move will hurt its own gas supplies.
However, Mr Scholz said Russia’s actions had gone a step too far and the pipeline should not be approved.
11:12 AM
Russia tensions rock commodity markets
Prices for key commodities ranging from wheat to platinum have jumped as the escalating conflict between Russia and Ukraine sparked fears of supply disruptions.
The region is a major global supplier of raw materials such as wheat, corn and sunflower oil, while Russia is one of the world’s most important sources of metals including aluminium and nickel.
Wheat futures rose 2.8pc, while corn traded 2.1pc higher. Aluminium jumped as much as 3.1pc, closing in on an all-time high, while nickel hit a new 10-year high.
The surge in prices for raw materials – used in everything from food to cars – will add more fuel to the inflation already hitting economies around the globe.
Meanwhile, energy markets were also rattled by the rising tensions. Gas prices jumped as much as 13pc, while Brent crude surged towards $100 a barrel.
10:52 AM
FTSE 100 swings back into the green
Well, it’s been a volatile morning on the markets.
After plunging 1.4pc at the open, the FTSE 100 pared its losses and is now trading up 0.4pc.
Oil giants BP and Shell are the biggest upward push on the index, tracking oil prices as they hurtle towards $100 a barrel.
There are also gains for Smith & Nephew, InterContinental Hotels Group and Legal & General following updates this morning.
The midcap FTSE 250 is now trading flat after dropping as much as 1.8pc.
10:37 AM
John Wood slumps on $100m Poland charge
John Wood has suffered its biggest fall in almost two years after revealing it will take a $100m (£74m) charge on a project in Poland.
Shares sank as much as 16pc – the most since the outbreak of Covid in March 2020 – after the company announced the charge at its long-delayed Aegis project, which involves constructing buildings at a US missile defence facility.
It’s the latest blow for the Scottish engineering company, which has already been hit by lower spending among oil and gas producers.
John Wood said the charge mainly relates to an assessment of “future customer recoveries,” legal expenses and additional costs of about $20m to complete the project.
The company will delay its 2021 results, previously due on March 8, until a review of the project is finished.
10:26 AM
Opec: We don’t need to pump more oil
Several key members of the Opec producer cartel have insisted there’s no need to pump more oil even as prices surge towards $100 a barrel.
Iraq and Nigeria said the group’s strategy of gradually raising production is enough to balance the market and the group has no need to be more aggressive.
Opec has come under pressure to pump more oil amid an extended rally in prices. An escalation of the Russia-Ukraine conflict has pushed Brent crude to $99, extending this year’s jump to 27pc.
The 23-nation alliance, led by Saudi Arabia and Russia, next meets on March 2. It is factoring in growth in output from non-Opec members such as Brazil and Canada and says it doesn’t want to see any increase in commercially-stored oil around the world.
10:22 AM
Coca-Cola bottle gears up for Russia sanctions as profits rise
Coca-Cola’s European bottling company has said it’s got contingency plans in place to cope with the escalating Ukraine crisis as it posted a huge rise in profits driven partly by its Russian business.
Coca-Cola HBC said it was considering stockpiling ingredients to limit any disruption in Russia after the West said it would roll out sanctions on Moscow.
Chief Executive Zoran Bogdanovic told Reuters: “We have contingencies in place for all scenarios, including alternative sourcing, so that we can act swiftly to whatever happens.”
The London-listed company, which operates in 29 European and African countries and counts Russia and Nigeria as its two biggest markets, had learned lessons from its experience during the 2014 Russia-Ukraine conflict.
It came as Coca-Cola HBC beat expectations by posting a 24pc rise in pre-tax profit for last year to €831m (£693m) as the easing of Covid restrictions drove up demand for fizzy drinks.
Still, shares dropped more than 5pc, plunging the firm close to the bottom of the FTSE 100.
10:09 AM
More reaction: Monetary policy still key risk
Dubravko Lakos-Bujas at JP Morgan says:
While the path of Russia-Ukraine crisis remains unclear with potentially elevated market volatility in the short-term, tightening monetary policy, in our view, still remains the key risk for equities as central banks attempt to aggressively re-anchor inflation expectations lower.
Overly restrictive monetary policy could result in an outright policy error especially if the business cycle continues to deteriorate. At the same time, the Russia/Ukraine crisis could force a reassessment of the Fed tightening path resulting in central banks turning less hawkish, while policymakers may consider additional fiscal stimulus.
Sean Darby at Jefferies says:
Whilst the escalation in tensions is unwelcome, it is unlikely to alter global economic variables that much.
The initial reaction to President Putin’s declaration was an immediate risk-off with oil prices spiking. Our sense is that part of the equity move was a miscalculation over the earlier Russian troop withdrawal.
Russia’s economy is itself strong with record foreign exchange reserves, signs of inflation peaking (January 8.7pc), its highest current account ever and debt-to-GDP of around 20pc.
The Ukrainian currency has been under pressure recently, while government bond yields have spiked but not to the extent seen during the annexation of Crimea.
10:08 AM
Reaction: Russia-Ukraine crisis tears through markets
Here’s a round-up of some analyst reaction as the escalating conflict between Russia and Ukraine rattles markets.
Elisa Lignos at RBC Capital Markets says:
The short-term market reaction will depend on the extent of sanctions imposed by the West. Western leaders have two options – a ‘modest’ approach, trying to signal de-escalation (what markets ‘want’ to see) or a firmer approach, recognising that allowing Putin to dismantle Ukraine piece by piece will still achieve his end goal, over a longer timeframe.
EU ambassadors are meeting today to discuss their plan for sanctions… The US response is probably more important. This boils down to whether this is termed ‘an invasion’ or not. Blinken is still scheduled to meet Lavrov in Geneva on Thursday.
Mark Haefele at UBC Global Wealth Management says:
While we believe it is too early to make a final assessment on what Monday’s events may mean for the course of events, we remain of the view that the severe risk case we described earlier – including fighting and a prolonged interruption of Russian energy exports – still represents a tail risk at this stage.
Allocations to commodities and energy stocks are an attractive option to help investors hedge portfolio risks. Energy prices would likely rise in the event of an escalation around Ukraine, as well as if cooler heads prevail amid rising demand and somewhat constrained supply.
10:03 AM
Hargreaves Lansdown suffers record slump as inflows fall short
It was a less positive update from Hargreaves Lansdown this morning, however.
The investment platform plunged as much as 18pc – its biggest one-day drop on record – after net new inflows for the first half fell short of analyst estimates.
Net new business inflows stood at £2.3bn, below estimates of £2.9bn. The company also disappointed on assets under administration, revenue and pre-tax profit.
Hargreaves Lansdown enjoyed a pandemic boom as market volatility drove up trading levels, but it seems business is returning to normal.
Analysts at Jefferies said the company was sacrificing profitability for growth, adding it was possible that bigger clients had left the platform or drawn down, while newer ones were smaller.
09:54 AM
HSBC pays out £2.6bn in bonuses as profits surge
After all the market turmoil this morning, let’s check in on the big corporate news of the day…
HSBC has handed out a whopping $3.5bn (£2.6bn) in bonuses after its profits more than doubled.
The staff bonus pool increased by a third, while bosses landed £4.9m in pay and bonuses, as well as £4.1m in long-term performance share awards.
Chief executive Noel Quinn picked up a total pay package of £9m for 2021.
The huge payouts came as HSBC reported pre-tax profits of $18.9bn (£13.9bn) last year, up from $8.8bn in 2020, when pre-tax profits fell 34pc due to hefty provisions for pandemic loan losses.
2021 is proving to have been a lucrative year for bankers, with NatWest and Standard Chartered announcing large increases in their bonuses. Barclays is expected to follow suit later this week.
09:46 AM
Russia shrugs off ‘predictable’ Western sanctions
Russia has brushed off the threat of sanctions, saying the West would impose them regardless of events and describing the response to Russia’s recognition of two breakaway Ukrainian regions as predictable.
Foreign Minister Sergei Lavrov said: “Our European, American, British colleagues will not stop and will not calm down until they have exhausted all their possibilities for the so-called ‘punishment of Russia’.
“They are already threatening us with all manner of sanctions or, as they say now, ‘the mother of all sanctions’.
“Well, we’re used to it. We know that sanctions will be imposed anyway, in any case. With or without reason.”
09:42 AM
Ukraine rattles Asian markets
While the FTSE 100 and its European counterparts have pared the worst of their losses, there was no such relief in Asia.
Hong Kong’s Hang Seng index tumbled more than 3pc – its worst daily drop in five months.
China’s main Shanghai Composite index fell just shy of 1pc. The MSCI index of Asian stocks was weaker by 1.6pc, while Japan’s Nikkei index closed down 1.7pc.
This picture pretty much sums up the mood…
09:36 AM
Expert reaction: Sunak faces balancing act with public finances
Alison Ring at accounting body ICAEW said the latest borrowing figures highlight the challenge facing Chancellor Rishi Sunak.
The strong tax receipts reported today will provide a welcome respite for the public finances, reducing the shortfall in the government’s income compared with its expenditure from previous forecasts.
However, the deficit is still on track to be the third highest ever recorded in peacetime, while public debt is more than half a trillion pounds higher than it was at the start of the pandemic.
The challenge for Rishi Sunak will be balancing the strong pressures on him to increase the support package for households facing rapidly rising energy costs and retail prices, with the need to strengthen the resilience of the public finances in the face of a great deal of economic uncertainty and increasing global security concerns.
The Chancellor will be acutely aware that while inflation is adding to tax revenues today it will go on to add to public spending tomorrow.
09:33 AM
UK debt interest bill leaps to highest January level since records began
Let’s turn our attention back to domestic matters now. Tom Rees has all the details from the latest public borrowing figures:
Britain’s debt interest bill leapt to its highest level for January since records began last month, eating into the Chancellor’s first-ever budget surplus following two years of heavy borrowing.
Government income exceeded spending by £2.9bn last month as a £4.5bn increase in debt servicing costs meant that day-to-day spending was even higher than a year earlier.
Interest costs rose from £1.6bn to £6.1bn as high inflation lifted payments on a quarter of the Government’s debt linked to the Retail Price Index.
The higher debt servicing costs mean the Chancellor, Rishi Sunak, is no longer undershooting the Office for Budget Responsibility’s (OBR) forecasts on a monthly basis, cutting his fiscal wiggle room ahead of the Spring Statement. In addition, some of the extra firepower will be used to help households facing much higher energy bills from April.
However, the coffers were bolstered by the recovery lifting receipts from a number of taxes, including income tax, stamp duty and business rates.
09:30 AM
Pound dips with Bank of England speech in focus
Sterling has also clawed back some of its early losses, but it’s still trading lower against the dollar.
The Russia-Ukraine tension has boosted the US currency as investors flocked to safe haven assets.
But closer to home, focus will be on a speech by Bank of England official Dave Ramsden, who’s one of the more hawkish members of the monetary policy committee.
Analysts at Citi said: “Ramsden was one of those voting for a 50 basis point rise in February, so the market will monitor his speech today for any clues as to whether he still thinks 50bp is appropriate or whether he may switch to 25bps.”
There’s also a focus on government finances after the UK’s debt interest bill leapt to its highest level for January since records began last month.
The pound fell 0.2pc against the dollar to $1.3595. Against the euro it was down 0.3pc to 83.37p.
09:23 AM
Markets ease back from lows
After an initial plunge, markets are starting to claw back their losses as investors wait for the next update in a highly febrile environment.
The FTSE 100, which dropped 1.4pc at the open, is now trading down 0.4pc. The pan-European Stoxx 600, which had been 2pc lower, is now down around 0.5pc.
Gold – a safe haven favourite for investors – is back down below $1,900, while Russian markets and the rouble have both risen from their worst levels of the day.
Geopolitical tensions are notoriously hard to price in, so it’s likely investors are sitting back and waiting for the next development in the conflict.
09:13 AM
We’ll keep exporting natural gas, says Russia
Russia’s energy minister Nikolay Shulginov has insisted that the country plans to continue exporting natural gas without any disruption.
Speaking at a conference in Doha, Mr Shulginov said: “We are looking for balance in global markets for gas.”
The latest escalation in the conflict between Russia and Ukraine pushed up natural gas prices as much as 13pc this morning, while the UK equivalent rose 8pc.
09:08 AM
Boris Johnson promises ‘first barrage’ of sanctions
The Prime Minister is due to set out further details of measures against Russia in the House of Commons later today.
We don’t know exactly what they’ll look like yet, but Mr Johnson has promised a “first barrage” of sanctions.
He said the measures will be “targeted not just at entities in Donbass and Luhansk and Donetsk, but in Russia itself – targeting Russian economic interests as hard as we can”.
He added:
I think that the tragedy of the present situation is that President Putin has surrounded himself with like-minded advisors who tell him that Ukraine is not a proper country.
And I think that he is going to find that he has gravely miscalculated.
09:01 AM
PM: We must reduce dependence on Russian gas
Boris Johnson added that the UK must move away from its dependence on Russian gas.
This is a major issue for European energy markets. Around a third of Russian supplies to the continent come via pipelines passing through Ukraine. Sanctions could disrupt supplies further.
However, Britain is less dependent on Russian gas than many of its EU counterparts.
08:56 AM
Boris Johnson: Putin has ‘gravely miscalculated’
Boris Johnson has warned that Vladimir Putin is “bent on full-scale invasion of Ukraine”, adding that there was “more Russian irrational behaviour to come”.
He’s vowed immediate sanctions against Moscow, details of which will come later.
The Prime Minister said:
[The sanctions] will hit Russia very hard and there is a lot more that we are going to do in the event of an invasion.Be in no doubt that if Russian companies are prevented from raising capital on the UK financial markets, if we unpeel the facade of Russian ownership of companies, of property, it will start to hurt.
08:49 AM
UK to impose ‘immediate’ package of sanctions
Boris Johnson has confirmed the UK will target Russia with an immediate package of economic sanctions.
The Prime Minister, who’s just chaired an emergency COBRA meeting, said Putin had “completely torn up international law”.
He added that Britain will now impose an “immediate package of international sanctions”.
These will include some in Russia itself, with Mr Johnson saying they would hit the “economic interests that have been supporting Russia’s war machine”.
He’s set to outline more details in the House of Commons this afternoon, hinting that tougher measures could be imposed if there’s a full-scale invasion.
08:43 AM
EU sanctions could be unveiled this afternoon
EU foreign ministers may decide on Russia sanctions after a meeting in Paris this afternoon, according to an EU official.
Reuters reports that EU ambassadors in Brussels were set to discuss a wider sanctions package than considered on Monday.
We’re still waiting for details of the UK’s sanctions against Moscow.
08:41 AM
Oil closes in on $100 a barrel
We’re not far away now. Russia’s incursion into Ukraine has pushed oil prices ever higher, with the $100 milestone now very much in sight.
Benchmark Brent crude is up 3.8pc to just over $99.
Many analysts have been predicting the milestone would be hit even without a full-blown conflict between Russia and Ukraine.
08:39 AM
China concerned about ‘worsening’ Ukraine situation
China is concerned about the “worsening” situation in Ukraine, Foreign Minister Wang Yi has said as he repeated calls for all parties to show restraint and resolve differences through dialogue.
Mr Wang told US Secretary of State Antony Blinken in a telephone call that the legitimate security concerns of any country should be respected, according to the Chinese foreign ministry.
He told Mr Blinken: “The situation in Ukraine is worsening. China once again calls on all parties to exercise restraint.”
The US State Department said that on the call Mr Blinken underscored the need to preserve Ukraine’s sovereignty and territorial integrity amid Russia’s “aggression”.
Earlier today China’s embassy in Ukraine warned its nationals there not to venture into unstable areas, but stopped short of telling them to leave, as many other nations have advised their own citizens.
08:29 AM
FTSE risers and fallers
It’s been a rough start for markets this morning as investors weighed up the prospect of war in Europe.
The FTSE 100 plunged 1.4pc at the opening bell, though it’s since pared losses to a decline of 0.7pc.
There are losses across the board for heavyweight stocks, while Russia-exposed miners Polymetal International, Petropavlovsk and Evraz fell between 3.5pc and 11.7pc on the possibility of sanctions.
HSBC was down 1.4pc as its profits fell behind expectations, while Hargreaves Lansdown slumped 15pc following its disappointing results.
The domestically-focused FTSE 250 was down 1pc, having dropped as low as 1.8pc.
08:23 AM
Expert reaction: Russia crisis could fuel global stagflation
Jeffrey Halley, an analyst at OANDA, says a conflict in Europe could disrupt monetary policy plans and fuel volatility.
A full-scale invasion of Ukraine by Russia will leave many central banks with itchy hiking trigger fingers in a quandary.
The immediate impact would be an exacerbation of the rampant inflationary pressures globally as oil hits $130+ a barrel.
But the inevitable slump by equity markets and high-yield bond markets, just as credit is tightening around the world will probably have them, along with the Fed, hitting the pause button on tightening, and even perhaps unwinding forward guidance.
Volatility will continue to be the winner, as will the US dollar and gold, and global stagflation could be the fait accompli for some time to come.
08:18 AM
Russian central bank vows support
Russia’s central bank has said it’s ready to take all necessary measures to support financial stability, as Russian assets were hammered by geopolitical fears after Moscow sent “peacekeeping” forces into eastern Ukraine.
In an effort to help the financial sector adapt to increased volatility, the central bank said banks would be permitted to use the market value of stocks and bonds in their portfolios as of February 18 in earnings reports until October.
08:14 AM
Rouble slumps to 15-month low
The rouble sank to a 15-month low against the dollar this morning as Vladimir Putin puts Russia on a war footing.
The Russian currency suffered its biggest one-day drop since the start of the pandemic on Monday, plunging on fears that Putin’s deployment of “peacekeeping” forces was a precursor to a full-scale invasion.
The volatile rouble fell 1.1pc to 80.64 against the dollar this morning after hitting 80.97 – a level last seen on March 23 2020.
08:08 AM
European markets tumble into the red
The jitters are being felt in equity markets across the globe this morning.
After the FTSE dropped 1.3pc, it’s an even worse start for Europe’s main indices. France’s CAC and Germany’s Dax are both down more than 2pc.
08:05 AM
FTSE 100 slumps at the open
As expected, the FTSE 100 has dropped sharply at the open.
The blue-chip index slumped 1.3pc to 7,387 points as Russia’s decision to push troops into Ukraine rattled global markets.
We’ll be keeping an eye on the index ahead of expected sanctions against Moscow, which could send shares down even further.
07:59 AM
Javid: Putin has chosen confrontation over dialogue
Russian President Vladimir Putin’s actions towards Ukraine show he has chosen confrontation with the West over dialogue, Sajid Javid has said.
The Health Secretary told the BBC: “We’ve always preferred dialogue and still continue to do so but it’s clear from President Putin’s actions that he has chosen confrontation over dialogue.”
His comments come as Boris Johnson chairs an emergency meeting of COBRA to determine sanctions against Russia.
07:38 AM
Oil and gas prices surge
As the conflict escalates, fears are mounting that European energy supplies could be disrupted.
About a third of Russian gas supplies to Europe normally travel through pipelines crossing Ukraine. Sanctions against Moscow could also upend commodity markets from oil and gas to metals and agriculture.
Benchmark European gas prices surged as much as 13pc, before trading up around 10pc. The UK equivalent is up more than 8pc.
Meanwhile, oil prices have continued their ascent after a brief hiatus, with Brent crude hitting a new seven-year high of over $97 a barrel.
The escalation in tensions means oil could well hit the milestone of $100 in the coming days.
07:30 AM
US to impose sanctions on Russia
It’s not just Britain threatening sanctions, though.
US ambassador to the United Nations Linda Thomas-Greenfield has confirmed that the US will impose measures against Moscow for its violation of international law.
In a tweet she wrote: “We can, will, and must stand united in our calls for Russia to withdraw its forces, return to the diplomatic table & work toward peace.”
Tomorrow, the U.S. will impose sanctions on Russia for its violation of international law and Ukraine’s sovereignty and territorial integrity. We can, will, and must stand united in our calls for Russia to withdraw its forces, return to the diplomatic table & work toward peace.
— Ambassador Linda Thomas-Greenfield (@USAmbUN) February 22, 2022
07:27 AM
Sajid Javid: Invasion of Ukraine has begun
Sajid Javid has warned that Russia’s invasion of Ukraine has begun, adding we were “waking up to a very dark day in Europe”.
Tanks have been spotted rolling into breakaway regions of Ukraine after President Vladimir Putin recognised their independence.
The Health Secretary told Sky News that Putin had “decided to attack the sovereignty of Ukraine and its territorial integrity”, adding: “You could conclude that the invasion of Ukraine has begun.”
Boris Johnson is currently chairing an emergency meeting of COBRA, during which he’s expected to finalise financial sanctions targeting Russian businesses.
07:20 AM
Russian stocks extend fall
Russian stocks have dropped even further this morning after suffering their sharpest decline since March 2014 as the standoff between the West and Russia intensifies.
The benchmark MOEX Russia Index dropped 7.1pc, with energy giants Gazprom and Lukoil – as well as financial services firm Sberbank – suffering the biggest falls.
The index had slumped as much as 14pc on Monday – its biggest drop since the global financial crisis in 2008.
The rouble plunged to a 15-month low against the dollar.
07:14 AM
Markets braced as Putin moves troops into Ukraine
Good morning.
It’s set to be a tumultuous day on markets after Russian President Vladimir Putin stepped up the assault on Ukraine.
The Russian leader ordered the deployment of troops to two breakaway regions in eastern Ukraine after recognising them as independent on Monday, sparking fears of a full-blown conflict.
Asian markets slumped, and the FTSE 100 is set to follow suit. Fears of disruption in energy markets sent natural gas prices surging 13pc, while oil prices pushed towards $100 a barrel.
5 things to start your day
1) The City takes on Brussels in ‘high stakes poker’ over Brexit freedoms EU-era regulations under scrutiny as bloc ramps up plans to poach clearing off London
2) Lotus courts investors to capitalise on China’s electric car revolution British supercar maker hopes China’s middle-class can be its new growth engine
3) Richard Branson’s Hyperloop slashes half its staff in cargo shift Redundancies follow exodus of executives at vacuum-based transport company
4) British regulator wades into Sir Nick Clegg’s battle with Google Search giant’s move to block ad-tracking tech could cost Facebook tens of billions of dollars
5) Heathrow chief quits civil service recruitment panel after backlash from airlines John Holland-Kaye steps down after airlines raised impartiality fears
What happened overnight
Global stocks tumbled while safe-havens rallied and oil surged as Europe’s eastern flank stood on the brink of war after Russian President Vladimir Putin ordered troops into breakaway regions of eastern Ukraine.
MSCI’s broadest index of Asia Pacific shares outside Japan was on course for its worst day for this month, off 1.7pc, weighed by markets in Hong Kong and mainland China. Japan’s Nikkei shed 1.7pc.
US and European markets were also braced for sharp losses at the opening bell, with S&P 500 futures down 1.4pc, Nasdaq futures off 1.9pc, the pan-region Euro Stoxx 50 futures 1.1pc lower, and FTSE futures down 0.6pc.
Coming up today
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Corporate: Antofagasta, HSBC, InterContinental Hotels Group, Smith & Nephew (full-year results); Hargreaves Lansdown (interims)
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Economics: House price index (US), manufacturing PMI (US), services PMI (US), consumer confidence (US), inflation (EU)
