2022/02/28 (010) Column

RUB having fallen as much as 40%
Moscow Exchange extend trading suspension
US Stocks close mixed, european shares tumble & Oil up
Central Bank of Russia raised its benchmark policy rate to 20%


Moscow Exchange Extend Trading Suspension
The Central Bank of Russia suspended equity trading at the Moscow Exchange for two consecutive days until Tuesday, due to heightened volatility from harsher western sanctions on Russia as retaliatory measures on the Russian invasion in Ukraine. The development came after the Central Bank of Russia raised its key policy rate to 20% from 9.5% on Monday in an emergency move to counter the risk of further depreciation in the currency. The Russian ruble tanked as much as 40% in offshore markets after Western nations announced new sanctions against Russia over its invasion of Ukraine. Western allies agreed on Saturday to remove key Russian banks from the SWIFT interbank messaging system and freeze the assets of Russia’s central bank, limiting the country’s ability to access its overseas reserves. To make things even worst today Biden’s administration banned U.S. people and companies from doing business with the Bank of Russia, the Russian National Wealth Fund and the Ministry of Finance.

Russian Ruble Pares Some Losses
The Russian ruble was trading above 100 per US dollar on Monday, having fallen as much as 40% to a fresh record low of $118.6 earlier in the session, after the central bank raised its key interest rate to 20% from 9.5% and ban foreigners from selling securities locally to support the currency. During theweekend, the US, EU and their allies agreed to remove key Russian banks from the SWIFT interbank messaging system and freeze the assets of Russia’s central bank, limiting the country’s ability to access its overseas reserves. Analysts suggested that unless Russia finds alternative means of reaching the global financial system, it faces the risk of being isolated from the global economy. Investors’ concern also grew after Putin put Russia’s nuclear deterrence forces on high alert Sunday. Despite the escalation, Ukrainian and Russian officials have agreed to hold talks near the Belarusian border with no preconditions.

US Stocks Close Mixed
The Dow Jones slipped 169 points, the S&P 500 closed down 0.3%, while the Nasdaq rebounded 0.4 as investors continued to monitor the Russian invasion of Ukraine. G7 nations agreed to exclude Russian banks from SWIFT, and the Biden administration banned US people and companies from doing business with the Bank of Russia, the Russian National Wealth Fund, and the Ministry of Finance. Defense and cybersecurity stocks helped limit Nasdaq losses while the banks sunk drugging down the Dow Jones. Adding to the gloomy mood, the Federal Reserve warned last week that inflation could persist longer than expected unless a shortage of available workers begins to ease. Still, the three major US averages lost roughly 4% in February.

European Shares Tumble
European stocks ended a roller-coaster February lower. The benchmark DAX 30 fell to around 14,420 to record a second straight monthly decline as investors digested the latest sanctions against Russia and its implications for European companies and banks. Western nations and Japan agreed to ban Russian financial institutions from the global payments system SWIFT closing Russia’s capital account. Shares of European banks suffered the sharpest declines on the region’s exchanges Monday, with Deutsche Bank falling 8%, the most on the DAX 30.

German 10-Year Bund Yield Falls to Over 3-Week Low
The yield on the German 10-year Bund declined to below 0.16%, the lowest in more than three weeks, as investors assess how the European Central Bank will respond to the current Russia-Ukraine war. Concerns over the Eurozone’s economic growth mounted due to higher prices of commodities and energy as Western nations announced hash sanctions on Russia. The Biden administration said that it would ban US people and companies from doing business with the Bank of Russia, the Russian National Wealth Fund, and the Ministry of Finance; after G7 nations agreed to exclude Russian banks from SWIFT. Money marketsnow see the first ECB rate hike only in September, compared to earlier expectations of June; and price in a total of 30 basis points increases by year-end, from roughly 35 bps earlier.

Euro Remains Under Pressure
The euro depreciated to below $1.12, closing in on the weakest level since June 2020 amid heightened geopolitical risks to the bloc’s economy from higher prices of commodities and energy after Russia invaded Ukraine and the West ramped up sanctions. 

Oil Poised for Third Straight Monthly Gain
WTI crude oil surged more than 4% to above $95 a barrel on Monday, and it’s on track for a third consecutive monthly gain after Western nations imposed fresh sanctions on Russia, raising fears of supply disruptions from one of the world’s largest oil and gas producers. This massive rally that saw the US benchmark top $100 for the first time since 2014 earlier this month already prompted discussions about a coordinated release of about 60 million barrels of oil from the US and its ally’s emergency oil reserves to cool markets.