Tuesday 1 March 2022

Unnecessary War Day Six. Fed Day Minus One.

 Baltic Dry Index. 2040 -36  Brent Crude 100.99

Spot Gold 1906

Coronavirus Cases 02/04/20 World 1,000,000

Deaths 53,100

Coronavirus Cases 01/03/22 World 437,346,293

Deaths 5,975,535

The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.

H. L. Mencken.

In Unnecessary War Day 6, it’s impossible to see any meaningful “win” for Russia in its war with Ukraine.

Even in the unlikely event Ukraine agrees to some sort of truce, Russia will have to give back all the territory captured.  Sanctions would remain in place long after any supposed “victory.”

Sort of lose – lose for Russia and most Russians. 

Not that that will be any comfort to Ukraine and most Ukrainians.  The war is being fought on Ukrainian soil, doing immense physical and economic damage. 

The west will put in place reconstruction help over several years duration, but at best that is several week’s away, more likely months.

For today, sadly, another day of death, destruction, pain and refugees. 

In regular business news, Fed Chairman Powell gets to pontificate in Washington, District of Crooks tomorrow and again on Thursday. Stocks gamblers are betting Russia’s war makes it difficult for the Fed to meaningfully raise their interest rate this month if at all.

Asia-Pacific markets mostly gain as investors weigh Russia-Ukraine conflict

SINGAPORE — Asia-Pacific markets mostly rose on Tuesday as investors navigated the changing situation in Russia and Ukraine.

Japan’s Nikkei 225 gained 1.57%, while the Topix advanced 1.05%.

In China, the Shanghai composite gained 0.28% and the Shenzhen component fell 0.24%. Hong Kong’s Hang Seng index was almost flat.

China’s official manufacturing Purchasing Managers’ Index for February was 50.2, beating analyst expectations of a reading of 49.9 in a Reuters poll. The February figure is slightly higher than January’s 50.1.

A reading above 50 represents expansion, and a figure below that level signifies contraction. PMI readings are sequential and represent month-on-month expansion or contraction.

The private PMI survey also showed growth in China’s factory activity.

Australia’s S&P/ASX 200 was up 0.83%. The Reserve Bank of Australia kept rates on hold at 0.1% at its meeting, in line with expectations from a Reuters poll. It said the war in Ukraine is a “major new source of uncertainty,” and that it is monitoring how various factors affect inflation in Australia.

Elsewhere, South Korea markets are closed for a holiday on Tuesday.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.41%.

U.S. stocks were volatile overnight, and the three major indexes posted sharp monthly losses as investors assess the uncertainty in Russia and Ukraine, and the related sanctions.

The two countries held their first round of talks on Monday, and the Associated Press reported that more negotiations could happen soon.

The U.S. and its allies have announced heavy sanctions on Moscow following Russia’s invasion of Ukraine last week.

Canada became the first Western nation to specifically target Russian energy when it said it will ban Russian crude oil imports. The White House said it has not ruled out restrictions on U.S. purchases of oil and gas, but has not sanctioned the industry so far.

More

https://www.cnbc.com/2022/03/01/asia-pacific-markets-russia-ukraine-crisis-oil-and-currencies.html

Stock futures little changed ahead of first trading session of March, Russia-Ukraine conflict in focus

U.S. stock futures were little changed early on Tuesday as investors continue to monitor the fighting between Russia and Ukraine.

Dow futures declined 23 points or 0.06%. S&P 500 futures dipped 0.1% and Nasdaq 100 futures slid 0.22%.

In a volatile session on Monday, the Dow Jones Industrial Average lost nearly 170 points. The S&P 500 dropped 0.24% and the Nasdaq Composite rose 0.4%.

The moves come amid fighting between Russia and Ukraine, where Ukrainian forces have held key cities including the capital of Kyiv.

Ukrainian and Russian officials wrapped up a critical round of talks Monday.

Meanwhile, the central bank of Russia more than doubled its key interest rate on Monday, as the ruble plummeted after heavy sanctions were imposed on Moscow by the West.

JPMorgan’s Marko Kolanovic said Monday the worst of the Russia-Ukraine sell-off might be over.

“The Russia/Ukraine crisis will continue to produce market volatility, but the direct impact on corporate earnings should be small. Indirect risks are more substantial, given effects of higher commodity prices on inflation, growth, and consumers,” Kolanovic said in a Monday afternoon note. “However, one silver lining is that the crisis forced a dovish reassessment of the Fed by the market.”

Investors are also gearing up to hear from Federal Reserve Chair Jerome Powell in his semiannual hearing at House Committee on Financial Services, which begins on Wednesday.

Monday also marked the final trading day of February. The Dow lost 3.5% in February. The S&P 500 and Nasdaq fell 3.1% and 3.4%, respectively, this month.

More

https://www.cnbc.com/2022/02/28/stock-market-futures-open-to-close-news.html

Up next, how Putin lost Russia’s war on Ukraine.

Big Oil Walks Away After Decades in Russia

With years of investment unraveling, attention now turns to TotalEnergies and Exxon’s investments in the country.

28 February, 2022

First BP, then Shell. In just two days, Britain’s twin energy giants have dumped Russian investments nurtured over decades and shut themselves out of the world’s largest energy exporter, probably forever.

Shell Plc’s move to exit a stake in the Sakhalin-2 LNG project, an investment that dates back to the Yeltsin era, follows BP Plc’s announcement on Sunday that it will walk away from a holding in Russia’s state oil producer, Rosneft PJSC. Their decisions put pressure on remaining foreign investors, including Exxon Mobil Corp. and France’s TotalEnergies SE, to follow suit as Russia’s war in Ukraine forces a dramatic rupture with the global economy.

More

https://www.bloomberg.com/news/articles/2022-02-28/first-bp-now-shell-big-oil-walks-away-after-decades-in-russia-as-war-rages

Mastercard blocks multiple financial institutions over sanctions on Russia

Feb 28 (Reuters) - Mastercard Inc said late on Monday it had blocked multiple financial institutions from its payment network as a result of sanctions imposed on Russia over Moscow's invasion of Ukraine.

Mastercard will continue to work with regulators in coming days, the company said in a statement. It also promised to contribute a $2 million for humanitarian relief.

Separately, Visa Inc (V.N) said in a statement that it is taking action to ensure compliance with sanctions and would also comply with any additional sanctions that may be implemented.

On Saturday, the United States and its allies said they would take action against Russia's central bank and bar some of the country's banks from the SWIFT international payments system. read more

Russia calls its actions in Ukraine a "special operation".

Russians rushed to ATMs and waited in long queues on Sunday amid concerns that bank cards may cease to function, or that banks would limit cash withdrawals after Western sanctions. read more

https://www.reuters.com/business/mastercard-blocks-multiple-russian-financial-institutions-network-2022-03-01/

Russian economic collapse will be hard to avoid

LONDON, Feb 28 (Reuters Breakingviews) - Fortress Russia is crumbling. The central bank more than doubled its main policy interest rate to 20% on Monday to support the plunging rouble. It won’t be enough given Moscow has a dearth of palatable policy options.

The rouble fell as much as 23% against the dollar at the first chance traders had to react to some Russian banks’ imminent ejection from the SWIFT payments system as well as restrictions on central bank reserves. Those Western sanctions shattered the impression that Moscow had large enough economic buffers to withstand whatever America and its Western allies might throw its way.

Those defences had been built up since 2014, when President Vladimir Putin annexed Crimea. Russia runs a budget surplus and has total external debt of only around $478 billion, or about a third of GDP. It had amassed more than $630 billion in central bank reserves read more and around $174 billion in the National Wealth Fund that grows when energy prices rise. Lenders like Sberbank (SBER.MM) were well capitalised and not reliant on foreign funding.

All that went out the window over the weekend. Sanctions make it less certain that large revenues from energy exports will keep rolling in. The central bank’s massive rate rise was of temporary help but won’t be enough to stop Russians from trying to convert their savings into foreign exchange or withdraw money out of banks altogether. That’s why Sberbank’s global depository receipt lost more than two-thirds of its value in London trading, even as the Moscow market was shut. The European Central Bank, meanwhile, said Sberbank’s subsidiaries in Austria, Croatia and Slovenia were likely to fail.

Central bank boss Elvira Nabiullina said Russia’s internal payments system can connect to international alternatives to SWIFT. Maybe, but that won’t make overseas counterparties any less rouble-averse. She could hike rates a lot higher, but that would hurt a damaged economy. Ramping up capital controls is another option. She has already ordered any attempt by foreigners to sell Russian securities to be rejected. But banning rouble sales outright would paralyse importers. The central bank sold $1 billion propping up the rouble on Thursday but will find it harder to keep going following fresh sanctions which also hit the wealth fund.

Nabiullina’s best efforts won’t prevent the rouble’s collapse from reverberating throughout the economy. For all her past policy successes, it’s not in her power to prevent an economic collapse.

https://www.reuters.com/markets/asia/russian-economic-collapse-will-be-hard-avoid-2022-02-28/

Global Inflation/Stagflation Watch.

Given our Magic Money Tree central banksters and our spendthrift politicians,  inflation now needs an entire section of its own.

U.S. GRAIN COMPANIES SHUTTING DOWN THEIR UKRAINE OPERATIONS
Feb. 28, 2022 
by Patrick Douglas, Wall Street Journal

U.S. agriculture companies operating in Ukraine are closing offices and shuttering facilities there in response to Russia's attack.

Archer Daniels Midland Co. said Thursday that it had stopped operating its facilities in Ukraine, where, a company spokeswoman said, the crop trader and processor employs more than 630 people. ADM's Ukraine facilities include an oilseed crushing plant in Chornomorsk, a grain terminal in the port of Odessa, six grain silos and a trading office in Kyiv.

Agriculture giant Bunge Ltd. closed company offices as well as temporarily suspended operations at processing facilities in two cities in Ukraine, the company said Thursday. Bunge employs more than a thousand workers in Ukraine who operate two processing facilities as well as grain elevators and a grain export terminal in various parts of the country.

CHS Inc., a farm cooperative and major grain shipper and retailer of seeds and chemicals, said it has been drawing down its export activity in Ukraine for the past few weeks. It employs 46 people in the region but doesn't own port operations in the country.

https://www.agrimarketing.com/s/139964

Global Trade Frayed by Pandemic Hit By Shocks of War

By Brendan Murray  28 February 2022, 12:00 GMT

Global supply chains came under mounting stress as the Russian invasion of Ukraine intensified, with transport routes hitting obstacles ranging from financial sanctions and closed airspace to armies intent on cutting off the logistics of war.

At least three merchant ships were reportedly shelled, and insurers are either refusing to cover vessels sailing into the Black Sea or demanding huge premiums to do so. An Antonov-225, the world’s biggest cargo plane, was reportedly damaged or destroyed by Russian forces while it was under repair at an airfield near Kyiv.

Major export powers and foreign companies have started to pull back. South Korea said it will strengthen screening over export control approvals and ban shipments of strategic goods to Russia. FedEx and UPS suspended international operations in both Russia and Ukraine. BP moved to dump its shares in oil giant Rosneft, joining the campaign to isolate the Russian economy.

Read More: Oil Shipping Costs Soar on Russia Invasion, Sanctions

Meanwhile, Europe’s big ocean carriers have suspended orders for Ukrainian shipments and avoided the nation’s main ports, diverting cargo to other destinations. As of early Monday, just one of those container lines had stopped taking orders for freight in Russia:

  • MSC said “stacking areas at hubs in the region are already very full and we expect the impact of the Ukraine situation to present additional challenges on top of existing global supply-chain disruptions.”
  • Maersk said Ukraine-bound freight would be discharged in Port Said and Korfez, and shipments to and from Russia “currently remain available but are potentially subject to change as things develop.”
  • CMA CGM said bookings to and from Odesa are suspended and “the floating cargo to Ukraine will be redirected to the ports of Constanza (Romania), Tripoli (Lebanon) or Piraeus (Greece).”
  • Hapag-Lloyd said last week it stopped taking orders for Ukraine cargo and a “temporary booking suspension” for shipments into and out of Russia.

·         As of Friday, DB Schenker, the logistics unit of German national railway operator Deutsche Bahn, said all services to and from Ukraine are “halted for the time being,” while some freight in and out of Belarus and Russia were still operating.

·         Ukrainian Railways said its employees were exempt from military mobilization so that they could help “continue our freight transportation operations, servicing the needs of the Ukrainian economy.”

More

https://www.bloomberg.com/news/newsletters/2022-02-28/supply-chain-latest-global-trade-feels-force-of-russia-invasion?cmpid=BBD022822_TRADE&utm_medium=email&utm_source=newsletter&utm_term=220228&utm_campaign=trade 

“The whole history of civilization is strewn with creeds and institutions which were invaluable at first, and deadly afterwards.”

Walter Bagehot.

Covid-19 Corner

This section will continue until it becomes unneeded.

Hong Kong considers lockdown as daily infections top 34,000

Hong Kong has reported more than 34,000 new coronavirus infections on Monday, a record, as authorities assess the possibilities of locking down the city

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