February 1, 2022

“As Russia and Ukraine tension continues, financial markets across the world are far more concerned with possible FED’s decision to lift interest rates.”

Sam Cornford, Partner – Head of Trading

Main Headlines

The US has drawn up sanctions targeting Vladimir Putin’s inner circle and its ties to the west as Washington broadens the list of financial penalties it and European allies will impose if Russia invades Ukraine. The move comes as the UK vowed on Monday to introduce new legislation strengthening London’s ability to target Kremlin-linked businesses and their owners in the country in case of Russian aggression on Ukraine. Senior US administration officials said that a list of individuals and family members that would be hit with sanctions had been developed in co-ordination with US allies as part of the effort to punish the Russian president in the event of an attack. The administration officials did not name the Russian oligarchs and family members in question but said that many were “particularly vulnerable targets because of their deepened financial ties with the west.” The measures to target Russian oligarchs would come in addition to broader sanctions against sectors of Russia’s economy, including banking and energy, that the US and its allies have been discussing for weeks.

Boris Johnson is heading to Ukraine where over the border more than 100,000 Russian troops are gathering, as he fights for his premiership after the publication of the Sue Gray report. The prime minister will hold talks with President Volodymyr Zelenskyy in Kyiv in a show of support for Ukraine as tensions on the country’s border rise amid fears of an invasion by Mr Putin’s forces. Mr Johnson’s visit will also coincide with the UK announcing £88m of new funding for Ukraine to support stability there and help reduce its reliance on Russian energy supplies. Meanwhile, Johnson was on Monday battling a renewed Conservative threat to his leadership, in the wake of a long-awaited and highly critical report on the party culture at the heart of his government. Johnson appealed to Tory MPs at a private meeting on Monday to stick with him, promising that there would no new revelations and saying that he took Covid lockdowns seriously: “I nearly died,” he said.

GBP

Sterling has weakened against most major currencies overnight. The Bank of England is poised to raise interest rates on Thursday amid growing concern over the pressure on households from high inflation in Britain’s cost of living crisis. Economists expect the central bank to increase its key rate from 0.25% to 0.5% in response to inflation. British house price growth accelerated in January, marking the strongest start to any year since 2005, mortgage lender Nationwide said on Tuesday. The overall number of Covid infections soared yesterday. The overall number of Covid infections soared yesterday. The revision added more than 800,000 new cases to England’s total count because until now reinfections have only been included in daily updates and not the cumulative total. The UK’s cumulative case count stood at 16,478,467 but this jumped to 17,315,893 cases yesterday. Meanwhile, the government is planning to revoke mandatory COVID-19 vaccinations for health workers after warnings that an already-stretched service could face crippling staff shortages. Boris Johnson’s government is being accused of a “straightforward breach” of its election manifesto promise to match billions of pounds worth of EU development funding for UK nations and regions after Brexit.

EUR

Euro is stronger against the dollar and sterling this morning. Russian Deputy Foreign Minister Alexander Grushko denied reports on Tuesday that Moscow had given the United States a written response to Washington’s counterproposals on security guarantees demanded by Russia. The world’s largest sovereign wealth fund has warned that investors face years of low returns as the surge in inflation becomes a permanent feature of the global economy. Nicolai Tangen, chief executive of Norway’s $1.3tn oil fund, told he was “the team leader for team permanent” in the fierce debate over whether the jump in rates was transitory or a lasting threat. Deutsche Bank AG employees returned to the lender’s US headquarters in New York on Monday after working from home during the recent surge in Covid-19 cases fuelled by the omicron variant. Austria has lifted its lockdown of the unvaccinated, Switzerland is gearing up for a “turbo” reopening and Germany’s finance minister has demanded an end date for Covid curbs as more countries prepare to ease pandemic controls.

USD

The dollar is weaker than most major currencies in the early morning trade. The US Senate is nearing a deal on sanctions against Russia as the Pentagon warns that President Vladimir Putin is continuing to build up Russian forces at the border with Ukraine. A bill including economic measures to punish Russia in the event of a full-blown invasion was being finalised with a plan to move it forward this week. Meanwhile, The US on Monday ordered the family members of its government employees in Belarus to leave the country as it warned against travel there amid tensions between Washington and Russia over Ukraine. Coronavirus vaccines for children younger than 5 could be available as soon as end-February under a plan that would lead to the potential authorization of a two-shot regimen in the coming weeks. Donald Trump’s fundraising slowed in late 2021 but the former leader still amassed more than $100 million in cash that could help Republicans in their bid to win congressional majorities later this year.

Markets

US equity futures were mixed Tuesday as traders weighed the Federal Reserve’s hawkish policy pivot and the corporate earnings outlook to gauge if global shares will continue a recovery from this year’s rout. Contracts on the S&P 500 wavered while those for the technology-heavy Nasdaq 100 climbed. European futures rose more than 1%. An Asia-Pacific share gauge made modest gains, though many regional markets were shut for a holiday. US Treasury yields were steady, and the dollar inched lower. Oil extended a climb that’s helped to take the Bloomberg Commodity Spot Index to another record high. Gold pushed past $1,800 an ounce. In Australia, the central bank scrapped a bond buying program, a step it said doesn’t imply a near-term interest-rate hike. A bigger-than-anticipated Indian budget deficit target hurt the nation’s sovereign debt. The US equity rebound pared January’s drop in global stocks to 5%, still the worst monthly performance since the pandemic’s onset in 2020. Waves of volatility have swept across markets after the Fed signalled swifter monetary policy tightening to curb inflation than many had expected.

Main Economic Data/Central Banks/Government (All Times CET)

8:00 p.m.: Germany Dec. retail sales
8:00 a.m.: U.K. nationwide Jan. house price index
8:30 a.m.: Sweden Jan. Swedbank/Silf PMI Manufacturing
8:45 a.m.: France Jan. CPI
9:15 a.m. Spain Jan. Markit Manufacturing PMI
9:30 a.m.: Switzerland Jan. Manufacturing PMI
9:45 a.m.: Italy Jan. Manufacturing PMI
9:50 a.m.: France Jan. Markit France Manufacturing PMI
9:55 a.m.: Germany Jan. unemployment claims, Markit/BME Manufacturing PMI
10:00 a.m.: Euro area Markit Jan. Manufacturing PMI
10:00 a.m.: Italy Dec. Unemployment Rate
10:30 a.m.: U.K. Dec. Mortgage Approvals, Markit Manufacturing PMI
11:00 a.m.: Euro area Dec. Unemployment Rate
11:15 a.m.: Switzerland sells bills
11:30 a.m.: Germany sells bonds
Austria’s law on mandatory Covid-19 vaccinations comes into force
Sweden Financial stability hearing with Riksbank, FSA in Parliament.
Hungary PM Viktor Orban meets Russia’s Vladimir Putin
OPEC+ Joint Technical Committee meets

Corporate Events

Earnings include Alphabet, Exxon, PayPal, Starbucks, Gilead, GM, AMD, Imperial Oil, UPS, Stanley Black and Decker, Chubb, Amcor, Pentair, Pultegroup

To learn more about Ballinger & Co., please visit our website or our LinkedIn page.