US and European partners are now considering banning Russian oil and natural gas imports. The Brent crude rose 9.9% from $118 to $126. Brent hit a high of $139, the highest since 2008. The S&P 500 fell 0.8% to 4,340 and Nasdaq Composite dropped 1.7% on Friday. The UST 10Y yields rose to 6pbs from 1.68% to 1.74%, while gold spot price has overcome the psychological level of $2000 per ounce. US Dollar remains strong with DXY trading at around 99. Given the intensification of geopolitical turmoil, Jerome Powell noted that he would propose a 25 bp hike in the next meeting, given the inflation backdrop, strong economy, and a tight labor market. The Fed meeting is scheduled for the March 16, which is next week. Inflation pressures faced by consumers are expected to continue to grow up and reach 7.9% year on year, the highest level in 40 years. Data wise, as published on Friday, Non-farm payrolls rose by 678,000 jobs (MoM) in February, exceeding Bloomberg’s consensus estimate of 423,000, while the January figure was revised up to 481,000 from the original an increase value of 467,000.
Bunds closed back in negative territory on Friday as havens rallied with worsening headlines on the Russia/Ukraine front.; 10Y yields shed some 9bps to close -0.69%. Equities were firmly in the red as risky assets took a beating with the Stoxx 600closing 3.57% in the red while peripherals also moved firmer as 10Y BTP yields shed some 3bps on Friday. The same trend appears to continue at the open with the benchmark bunds having touched -0.09% at 07.45GMT and the Stoxx 600 was down 2.72% at 08.15GMT; peripherals reversing Friday’s move as risk-off sentiment prevails trading 1.481% at 08.30GMT, 3bps higher than Friday’s close.
A 3rd round of negotiations between Russian and Ukrainian officials is scheduled for today. After closing on Friday at 105, the USRUB continued to fall and now trades around 130-135. Following statements form the US secretary of state Antony Blinken on a possible a ban of oil imports from Russia, higher oil prices do not seem to offer any support to the Russian currency. Russia is the 3rd largest oil supplier in the world after US and Saudi Arabia and this kind of restrictions can potentially seriously disrupt global economy. The move to ban Russian oil would further isolate Russia’s economy, which is already reeling under heavy sanctions and a growing corporate boycott. This weekend, payment networks Mastercard, Visa and American Express, accountants PwC and KPMG, added their names to a long list of companies freezing operations in Russia. Meanwhile, Russian President Vladimir Putin signed a decree on the procedure of paying debts to foreign creditors from the list of “unfriendly” countries. The head of state allowed to pay debts to foreign companies in Russian currency. Moody’s has cut Russia’s long-term issues and senior unsecured debt ratings from B3 to Ca with a negative outlook, a second downgrade in a week.