MNI US OPEN - RUB Volatility Sweeps Into European Markets

NEWS:

RUSSIA/UKRAINE (MNI/BBG): Talks between Russian, Ukrainian representatives have started, but little progress expected
Ukraine said a delegation led by its defense minister had arrived at the border with Belarus for talks with Russian officials. Zelenskiy has voiced skepticism that the talks would yield results but said he was willing to try if it meant any chance of peace. Russia, which sent a relatively low-level delegation including deputy ministers of defense and foreign affairs has set a limited scope. Zelenskiy repeated a request Monday for Ukraine to be fast tracked into the European Union.

RUSSIA(MNI): CBR have raised the key rate to 20% from 9.50% due to "cardinal" change in economy

• says external conditions for the Russian economy have drastically changed
• Rate hike is necessary to make ruble deposits attractive
• Bank of Russia governor is scheduled to speak at 4pm Moscow time
• Further rate decision to be made based on assessment of risks
• Have also confirmed that there is to be no stock trading on Monday via the Moscow Exchange, and a trading schedule for March 1st will be released before 9am local time Tuesday.

RUSSIA (BBG): Ruble Plunges 30% as Markets Briefly Freeze on Sanctions Stress
Russian markets were paralyzed and traders struggled to price the ruble on Monday as the stress of Western sanctions shook the country’s financial system. The Russian currency lost a third of its value in offshore markets at one point on Monday and hit an all-time low of 109 per dollar in Moscow. Quotes were infrequent and volatile at the start of the session, and traders warned that low liquidity was making it difficult to match buyers and sellers.

RUSSIA/UKRAINE(BBG/MNI/BBC): Russian Invasion Update

• Belarus was preparing to send troops into Ukraine as soon as Monday to help its ally Moscow, the Washington Post reported, citing an unnamed U.S. official.
• Russia’s plans for Ukraine face rapidly rising costs due to delays caused by tougher-than-expected resistance from forces on the ground, even as its military retains overwhelming advantages.
• A person familiar with Russian planning said the military would have hoped for faster progress. The Kremlin has declined to comment on details of the military operation, and its Defense Ministry says the campaign has been successful.
• Kyiv's defence ministry claims that more than 5,000 Russian soldiers have been killed in the first four days of fighting in Ukraine.
• The BBC has not been able to independently verify these claims, though the UK's Ministry of Defence believes Russia has taken "heavy" casualties in the opening stages of the conflict.

FED (BBG/CS): SWIFT Russian Ban Could Force Fed to Step In, Credit Suisse Says
The decision to exclude various Russian lenders from the SWIFT messaging system could result in missed payments and giant overdrafts within the international banking system and spur monetary authorities to reactivate daily operations to supply the market with dollars, according to Credit Suisse Group AG strategist Zoltan Pozsar.

FED (MNI): Fed To Stay Below Neutral Thru '23-NABE Respondents
The Federal Reserve is unlikely to raise the federal funds rate above estimates of neutral through 2023, even as forecasts for inflation have moved up significantly over the last three months, according to respondents in a National Association of Business Economics survey published Monday.

AUSTRALIA (MNI): Wages Data Allows Dovish RBA March Review
Concerns on geopolitical volatility due to Russia's invasion of Ukraine and underwhelming wages data last week are likely to see the Reserve Bank of Australia maintain its dovish outlook at this week's board meeting. Despite stronger than expected inflation, with trimmed mean inflation at 2.6% against the RBA's 2% to 3% target, wages growth is still flat with 0.7% growth in the December quarter for an annualised 2.3% rise.

DATA: 

MNI: SWISS Q4 GDP +0.3% Q/Q (SA), +3.7% Y/Y; Q3 +1.9% Q/Q
- SWISS FEB KOF ECON BAROMETER 105.0; JAN 107.2r

MNI: SPAIN FLASH HICP FEB +0.7% M/M, +7.5% Y/Y; JAN +6.5%r Y/Y

FOREX: Risk-Off as Sanctions Sweep Roils Russian Assets

• The impacts of Western sanctions targeting Russia's economy are clear to see early Monday, with Russian assets sliding aggressively, putting the RUB and Russia-related stocks considerably lower. London listings for the likes of Sberbank and Gazprom are down as much as 60%, while the USD/RUB rate sits higher by as much as 35%. The CBR's snap decision to more than double domestic interest rates has done little to help, with the 1050bps rate rise to 20% failing to stall the downtick in RUB rates.
• Acute volatility has bled into CEE and G10 FX, with regional currencies including SEK, NOK, HUF and PLN all lower so far. The primary beneficiaries have been haven currencies, putting USD, CHF and JPY at the top of the board, with markets now pondering any Fed response to renewed economic uncertainty - raising the focus on Powell's testimony to Congress this week.
• Focus turns to any further Russian efforts to stabilise the domestic economy as well as any potential counter-sanctions that Russia could send westwards.
• MNI Chicago PMI is the data highlight Monday, with CB speakers including ECB's Lagarde and Panetta as well as Fed's Bostic.

BOND SUMMARY: Core FI remains above Friday's close but lower than European opening levels

Sovereign bonds opened higher this morning. This is largely on the back of the extended Russian sanctions with Russian banks being barred from SWIFT and US/UK/EU nationals not able to deal with the Russian central bank or other official Russian institutions. Despite this, we have seen core fixed income off of its highs, despite remaining below closing levels of last week.

• Sovereign spreads have also widened this morning, with BTP-Bund 10-year spreads 3.4bp wider on the day.
• Looking ahead, the MNI Chicago PMI is the data highlight with Fed's Bostic and ECB's Lagarde both scheduled to speak.
• TY1 futures are up 0-22 today at 126-27+ with 10y UST yields down -5.1bp at 1.913% and 2y yields down -6.8bp at 1.504%.
• Bund futures are up 0.51 today at 166.66 with 10y Bund yields down -4.5bp at 0.184% and Schatz yields down -6.5bp at -0.452%.
• Gilt futures are up 0.25 today at 122.89 with 10y yields down -3.6bp at 1.453% and 2y yields down -4.7bp at 1.146%.

EQUITIES: European and US stocks hit after further weekend Russian sanctions

• Japan's NIKKEI up 50.32 pts or +0.19% at 26526.82 and the TOPIX up 10.69 pts or +0.57% at 1886.93
• China's SHANGHAI closed up 10.9 pts or +0.32% at 3462.306 and the HANG SENG ended 54.16 pts lower or -0.24% at 22713.02
• German Dax down 354.29 pts or -2.43% at 14216.51, FTSE 100 down 98.94 pts or -1.32% at 7389.7, CAC 40 down 192.83 pts or -2.86% at 6562.05 and Euro Stoxx 50 down 115.96 pts or -2.92% at 3854.62.
• Dow Jones mini down 439 pts or -1.29% at 33553, S&P 500 mini down 65.75 pts or -1.5% at 4315, NASDAQ mini down 188.5 pts or -1.33% at 13994.75.

COMMODITIES: European natgas leading energy prices higher

• WTI Crude up $4.9 or +5.35% at $96.49
• Natural Gas (NYM) up $0.16 or +3.49% at $4.624
• Natural Gas (ICE Dutch TTF) up $15.08 or +16.19% at $108.25
• Gold spot up $11.44 or +0.61% at $1899.88
• Copper up $3.4 or +0.76% at $451.95
• Silver up $0.07 or +0.27% at $24.3339
• Platinum up $3.67 or +0.35% at $1062.47