Russia Central Bank aggressive hikes rates and adds some capital controls

EU Mid-Market Update: Russia Central Bank aggressive hikes rates and adds some capital controls following Swift payment system ban.

Notes/Observations

- Ripple effects of fresh Russia sanctions reverberate; risk aversion sentiment dominate.

- Russia's central bank announced a slew of steps to support domestic markets; hiked key rate by 1,050bps to 20.00%.

- Russia and Ukraine meet for talks for the first time since the invasion began during the session.

Asia

- Japan Jan Preliminary Industrial Production misses consensus (M/M: -1.3% v -0.7%e; Y/Y: -0.9% v +0.1%e.

- Large China state run banks in Nantong in Jiangsu province said to have cut the minimum down payment required for first time home buyers to 20% (prior 30%).

- China Foreign Min Wang stated that its ‘One China’ principle was key to promoting US-China relationship; Should keep dialogue without decoupling.

- North Korea fires suspected ballistic missile off its east coast.

Russia/Ukraine

- EU, US and UK announce the cut off of certain Russian banks from Swift payment system (as speculated); To sanction the Russian Central bank (CBR) and cancel the golden passport program for Russians.

- Russia Central Bank released capital buffer to free up ~RUB733B (~$6.96B) and other additional measures to prop up banks.

- Russia President Putin ordered nuclear deterrent forces on high alert following sanctions.

- Ukrainian and Russian delegations to meet near Ukraine/ Belarus for peace talks without preconditions.

- Germany approves weapons deliveries for Ukraine (Note: policy U-turn). Germany reversing a longstanding policy of banning weapon exports to conflict zones.

- France intercepts Russian cargo ship in the English Channel in line with new EU sanctions against Moscow.

- S&P cut Russia’s sovereign rating from BBB- to BB+ (junk status).

- Fitch cut Ukraine sovereign rating to 'CCC' from 'B'.

- UK Foreign Sec Truss called on G7 countries to set ceilings on oil and gas imports from Russia that would be reduced over time. : Putin’s war was funded by revenues on oil and gas.

- Belarus passed a constitutional referendum that included a vote on end of 'nuclear-free status' to make it legal to host Russian nuclear weapons.

Europe

- ECB's Wunsch (Belgium) said to agree with market expectations for halt of conventional bond purchases in Q3, first rate hikes in late 2022 or early 2023.

- Russia Central Bank (CBR) going to start buying gold again on the domestic market (Note: would, be 1st purchase in two years).

Energy

- OPEC+ JMMC technical panel cuts its 2022 global supply surplus forecast by 200K to 1.1M bpd.

- UK said to considers using Strategic Oil Reserves to stabilize prices.

- German government pledged support for two LNG terminals to be built quickly to cut Russian gas dependence. German govt asked the Uniper to resume its plans to build a liquefied natural gas (LNG) terminal in Wilhelmshaven (previously shelved in 2020).

- BP to exits its 19.75% stake in Russia’s Rosneft ; To write down up to $25B at the end of Q1; BP's CEO Looney to resign from board of Rosneft; effective immediately.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 -1.27% at 447.78, FTSE -1.23% at 7,397.50, DAX -2.31% at 14,230.95, CAC-40 -2.80% at 6,563.26, IBEX-35 -1.12% at 8,391.50, FTSE MIB -2.41% at 25,151.00, SMI -0.71% at 11,902.30, S&P 500 Futures -1.51%].

Market Focal Points/Key Themes: European indices open lower across the board and remained broadly in the red as the session wore on; better performing sectors include materials and technology; sectors among those leading to the downside include financials and industrials; defense subsector gaining following announcement by Germany to increase military spending; Clipper Logistics to be acquired by GXO; McColl’s confirms receipt of takeover offer; earnings expected during the upcoming US session include Dentsply, Jones Lang, Global Partners and Banca Millenium.

Equities

- Consumer discretionary: AB Foods [ABF.UK] -3% (trading update).

- Energy: BP [BP.UK] -7%, Rosneft [ROSN.UK] -44% (BP sells Rosneft stake), Uniper [UN01.DE] -7% (said to be considering to revive plans for German LNG terminal).

- Industrials: Rheinmetall [RHM.DE] +32%, Thyssenkrupp [TKA.DE] +6%, Dassault Aviation [AM.FR] +8% (German defense spending announcement).

- Materials: CRH [CRH.UK] -2.5% (divestment).

Speakers

- Russia Central Bank (CBR) raised its Key 1-Week Auction rate by 1,050bps to 20.00% (intra-policy move). CBR noted that the external conditions had drastically changed. Rate hike designed to offset increased risks of RUB currency (Ruble) depreciation and inflation.

- Russia govt placed mandatory FX sales for companies; Consider to order Russian companies to sell 80% of FX revenues.

- Russia Fin Min Siluanov stated that would cut its 2022 borrowing plans; confirmed decision on sale of 80% of export revenues (aka capital control measure).

- Ukraine Presidential Office stated that its main goal of talks with Russia was for an immediate cease fire.

- Russia negotiator Medinsky: Russia is interested in coming to an agreement that is in the interests of both sides at talks with Ukraine withdrawal of Russian troops.

- Russia govt spokesperson Peskov declined to comment on Russia's aim in Ukraine and hoped that talks would start imminently. Economic reality had changed but country was prepared even for toughest sanctions. No reason to doubt the effectiveness and reliability of the central bank.

- European Council President Michel: Bloc has already an association agreement with Ukraine which can be deepened.

- Energy Commissioner Simpson stated that would ask EU energy ministers to support the emergency synchronization of the power grid later on Monday (Feb 28th).

- Iran govt official noted that a few key issues remain in nuclear talks. Says over 98% of the deal was complete and added that uranium enrichment to fall to JCPOA level if an agreement was reached.

Currencies/Fixed income

- Risk aversion flows continued to reverberate as geopolitical tension between Russia and Ukraine continued. Major core European bond and US 10-year yields were lower by over 5bps. USD benefited from its safe-haven stated.

- Money markets were showing signs of the most stress since the early days of the pandemic as traders scrabble for USD in the wake of toughened Western sanctions against Russia, prompting calls for help from central banks.

- RUB currency (Ruble) plunged to an all-time low above 112.5 against the USD after Western nations announced fresh sanctions to punish Russia for its invasion of Ukraine – including banning key Russian banks from the Swift payment system.

- EUR/USD tested 1-month lows at 1.1125 during the Asian session but consolidated its losses during the EU session as Russia and Ukraine held talks at the border for the 1st time since the conflict began. For the time being markets anticipate that the ECB would likely withdraw its pandemic-related stimulus in line with its current guidance at the upcoming March meeting.

Economic data

- (NL) Netherlands Jan Retail Sales Y/Y: 15.8% v 7.6% prior.

- (ZA) South Africa Jan M3 Money Supply Y/Y:5.7 % v 5.9%e; Private Sector Credit Y/Y: 3.1% v 2.9%e.

- (FI) Finland Q4 GDP Q/Q: 0.6% v 0.9% prior; Y/Y: 2.9% v 3.5% prior.

- (FI) Finland Jan PPI M/M: 1.5% v 2.9% prior; Y/Y: 23.4% v 23.3% prior.

- (SE) Sweden Q4 GDP Q/Q: 1.1% v 1.4%e; Y/Y: 5.2% v 6.2%e.

- (SE) Sweden Jan Trade Balance (SEK): +0.4B v -5.3B prior.

- (SE) Sweden Dec Non-Manual Workers Wages Y/Y: 2.2% v 2.4% prior.

- (SE) Sweden Jan Retail Sales M/M: 4.5% v 2.0%e; Y/Y: 5.1% v 4.1% prior.

- (NO) Norway Jan Retail Sales (includes auto/fuel) M/M: 0.4% v -3.0% prior.

- (NO) Norway Jan Credit Indicator Growth Y/Y: 5.0% v 5.0% prior.

- (DK) Denmark Q4 Preliminary GDP Q/Q: 1.1% v 1.2% prior; Y/Y: 4.4% v 3.6% prior.

- (FI) Finland Dec Final Trade Balance: -€0.2B v -€0.4B prelim.

- (TR) Turkey Q4 GDP Q/Q: 1.5% v 2.1%e; Y/Y: 9.1% v 9.0%e.

- (TR) Turkey Jan Trade Balance: -$10.3B v -$10.4Be.

- (TH) Thailand Jan Current Account Balance: -$2.2B v -$1.5Be; Overall Balance of payments (BOP): -$1.7B v +$2.4B prior; Trade Account Balance: $0.6B v $2.8B prior; Exports Y/Y: 7.9% v 23.0% prior; Imports Y/Y: 18.4% v 28.2% prior.

- (CH) Swiss Jan Real Retail Sales Y/Y: +5.1% v -0.5% prior.

- (ES) Spain Feb Preliminary CPI M/M: +0.6% v -0.4% prior; Y/Y: 7.4% v 7.1%e; CPI Core Y/Y: 3.0% v 2.4% prior.

- (ES) Spain Feb Preliminary CPI EU Harmonized M/M: 0.7% v 0.3%e; Y/Y: 7.5% v 7.0%e.

- (CH) Swiss Q4 GDP Q/Q: % v 0.3%e; Y/Y: % v 3.7%e.

- (CH) Swiss Feb KOF Leading Indicator: 105.0 v 108.2e.

- (AT) Austria Jan PPI M/M: 2.4% v 1.5% prior; Y/Y: 18.4% v 16.7% prior.

- (ES) Spain Dec Current Account: -1.3€B v +€1.0B prior.

- (CH) Swiss weekly Total Sight Deposits (CHF): 725.2B v 725.2B prior; Domestic Sight Deposits: 660.9B v 662.9B prior.

- (NO) Norway Central Bank (Norges) Mar Bank Daily FX Purchases (NOK): M v 0Me.

- (IS) Iceland Q4 GDP Q/Q: +2.2% v -1.1% prior; Y/Y: 4.4% v 6.8% prior.

- (CZ) Czech Jan M2 Money Supply Y/Y: 6.9% v 7.3% prior.

- (PL) Poland Q4 Final GDP Q/Q: 1.7% v 1.7% prelim; Y/Y: 7.3% v 7.3% prelim.

- (SL) Sri Lanka Feb CPI Y/Y: 15.1% v 14.2% prior.

- (GR) Greece Dec Retail Sales Value Y/Y: -11.5% v +16.7% prior; Retail Sales Volume Y/Y: 23.8% v 21.1 prior.

Fixed income issuance

- None seen.

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 ((DE) Germany to sell combined €6.0B in 6-month and 12-month BuBills.

- 05:30 (EU) European Union to sell €2.5B in 0.00% July 2026 NextGeneration Bonds (NGEU).

- 05:30 (IN) India Jan Fiscal Deficit (INR): No est v 637.5B prior.

- 06:00 (IE) Ireland Jan Retail Sales Volume M/M: No est v -3.2% prior; Y/Y: No est v -2.2% prior.

- 06:00 (PT) Portugal Q4 Final GDP Q/Q: No est v 1.6% prelim; Y/Y: No est v 5.8% prelim.

- 06:00 (PT) Portugal Jan Retail Sales M/M: No est v -2.3% prior; Y/Y: No est v 7.3% prior.

- 06:00 (PT) Portugal Feb Preliminary CPI M/M: No est v 0.3% prior; Y/Y: No est v 3.3% prior.

- 06:00 (PT) Portugal Feb Preliminary CPI M/M: No est v 0.3% prior; Y/Y: No est v 3.4% prior.

- 06:00 (IL) Israel to sell 2024, 2026, 2031 and 2032 bonds (5 tranches).

- 06:45 (US) Daily Libor Fixing.

- 07:00 (IN) India Jan Eight Infrastructure (key) Industries: No est v 3.8% prior.

- 07:00 (ZA) South Africa Jan Trade Balance (ZAR): 15.1Be v 30.1B prior.

- 07:00 (ZA) South Africa Jan Monthly Budget Balance (ZAR): -62.0Be v +41.9B prior.

- 07:00 (IN) India Q4 GDP Y/Y: 5.9%e v 8.4% prior; GVA Y/Y: 5.7%e v 8.5% prior.

- 07:00 (IN) India 2022 GDP Annual Estimate Y/Y: +9.1%e v -6.6% prior.

- 07:00 (MX) Mexico Jan Unemployment Rate NSA (unadj): 4.2%e v 3.5% prior; Unemployment Rate (Seasonally adj): No est v 4.0% prior.

- 07:00 (CL) Chile Jan Unemployment Rate: 7.2%e v 7.2% prior.

- 07:00 (CL) Chile Jan Manufacturing Production Y/Y: 4.0%e v 2.3% prior; Industrial Production Y/Y: No est v 1.7% prior; Total Copper Production: No est v 503.6K tons prior.

- 07:00 (CL) Chile Jan Retail Sales Y/Y: 18.5%e v 15.3% prior; Commercial Activity Y/Y: No est v 12.9% prior.

- 07:00 (MX) Mexico Dec Copper Production: No est v 39.67K tons prior; Silver Production: No est v 326.7 kilograms prior; Gold Production: No est v 7.4K kilograms prior.

- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement for upcoming issuance.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) Jan Advance Goods Trade Balance: -$99.3Be v -$101.0B prior.

- 08:30 (US) Jan Preliminary Wholesale Inventories M/M: 1.2%e v 2.2% prior; Retail Inventories M/M: No est v 4.4% prior.

- 08:30 (CA) Canada Q4 Current Account Balance: $2.2Be v $1.4B prior.

- 08:30 (CA) Canada Jan Industrial Product Price M/M: 1.0%e v 0.7% prior; Raw Materials Price Index M/M: 5.0%e v -2.9% prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €4.6-4.8B in 3-month, 6-month and 12-month bills.

- 09:45 (US) Feb Chicago Purchase Managers Index (PMI): 62.0e v 65.2 prior.

- 10:00 (MX) Mexico Jan Net Outstanding Loans (MXN): No est v 4.807T prior.

- 10:00 (CO) Colombia Jan National Unemployment Rate: No est v 11.0% prior; Urban Unemployment Rate: 15.0%e v 11.6% prior.

- 10:30 (US) Feb Dallas Fed Manufacturing Activity Index: 3.5e v 2.0 prior.

- 11:00 (NZ) New Zealand Feb House Prices Y/Y: No est v 27.5% prior.

- 11:30 (US) US to sell 13-week and 26-week bills.

- 12:00 (CA) Canada to sell 10 Year Bonds.

- 17:00 (AU) Australia Feb Final PMI Manufacturing: No est v 57.6 prelim.

- 17:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 101.8 prior.

- 18:00 (AU) Australia Feb House Price Index M/M: No est v 0.8% prior.

- 19:00 (KR) South Korea Feb Trade Balance: -$0.3Be v -$4.9B prior; Exports Y/Y: 18.7%e v 15.2% prior; Imports Y/Y: 24.1%e v 35.5% prior.

- 19:30 (AU) Australia Q4 Current Account Balance: A$15.3Be v A$23.9B prior.

- 19:30 (JP) Japan Feb Final PMI Manufacturing: No est v 52.9 prelim.

- 19:30 (TW) Taiwan Feb PMI Manufacturing: No est v 55.1 prior.

- 19:30 (TH) Thailand Feb PMI Manufacturing: No est v51.7 prior.

- 19:30 (MY) Malaysia Feb PMI Manufacturing: No est v 50.5 prior.

- 19:30 (VN) Vietnam Feb PMI Manufacturing: No est v 53.7 prior.

- 19:30 (ID) Indonesia Feb PMI Manufacturing: No est v 53.7 prior.

- 19:30 (PH) Philippines Feb PMI Manufacturing: No est v 50.0 prior.

- 19:30 (AU) Australia Jan Home Loans Value M/M: 0.3%e v 4.4% prior; Owner-Occupier Loan Value M/M: 4.5%e v 5.3% prior.

- 20:01 (IE) Ireland Feb PMI Manufacturing: No est v 59.4 prior.

- 20:30 (CN) China Feb Manufacturing PMI (Govt official): 49.8e v 50.1 prior; Non-manufacturing PMI: 50.7e v 51.1 prior; Composite PMI: No est v 51.0 prior.

- 20:45 (CN) China Feb Caixin PMI Manufacturing: 49.1e v 49.1 prior.

- 22:30 (AU) RBA Interest Rate Decision: Expected to leave Cash Rate Target unchanged at 0.10% prior.

- 23:00 (ID) Indonesia Feb CPI M/M: 0.0%e v 0.6% prior; Y/Y: 2.2%e v 2.2% prior; CPI Core Y/Y: 1.9%e v 1.8% prior.

- 23:30 (HK) Hong Kong to sell 3-month and 6-month Bills.

- 23:30 (TW) Taiwan to sell TWD30B in 20-year bonds.