Closing summary
With European stock markets closed, here’s a recap of the main events today.
Germany’s chancellor, Olaf Scholz, has pushed back against calls to ban Russian oil and gas imports as part of western sanctions against Moscow over its invasion of Ukraine.
Scholz cautioned that such a move could put Europe’s energy security at risk, and that energy imports from Russia were currently essential to citizens’ daily lives.
Scholz statement came after the US secretary of state, Antony Blinken, said on Sunday that the US was talking to its European allies about banning Russian oil imports.
Blinken’s comments triggered a dramatic surge in oil prices overnight, with Brent crude up 18% at one stage to hit $139 per barrel, the highest in 14 years.
It has since dipped back but is still around $125 per barrel, up from below $80 at the start of this year.
The price of wholesale gas also leapt alarmingly today, with the UK contract for delivery next month hittinga record of 800p per therm, compared to typical prices below 50p/therm a year ago.
Gas prices closed about 10% higher tonight around 500p, a level that would intensify the cost-of-living crisis gripping households and businesses.
European stock markets racked up fresh losses, as the Ukraine war continued to hammer share prices. Germany’s DAX shed another 2%, ending in a bear market – over 20% below its record high in January.
In London, the FTSE 100 fell another 0.4%, with oil producers and miners rallying, but banks, travel companies, retailers and consumer goods makers all under renewed pressure.
Companies continued to cut ties with Russia. All four of the UK’s big accountancy firms have now cut off businesses in Russia and Belarus, with EY and Deloitte joining KPMG and PwC in legally separating their operations.
The Conservative peer Greg Barker has resigned as chairman of EN+, the mining company part-owned by the sanctioned Russian oligarch Oleg Deripaska.
Three more Russian billionaires have resigned from the board of the $22bn (£17bn) investment firm LetterOne after the EU imposed sanctions on its two biggest shareholders.
Here are more of today’s stories:
We’ll be back tomorrow. Goodnight, GW.
Updated
The European Union is in the grip of a “growing gas crisis” aggravated by its dependency on Russia, Brussels will warn, as it makes a further push for energy savings and a switch to renewable power.
According to a draft paper on EU energy prices, which is due to be published on Tuesday, and which has been seen by the Guardian:
Gas and electricity prices will remain high and volatile until at least 2023. Compared to the outlook of last autumn, the situation has deteriorated.
Along with the rest of the world, the EU has been grappling with soaring energy prices for months, but Russia’s invasion of Ukraine has provoked soul searching about Europe’s gas dependency.
The union imports 40% of its gas from Russia, a figure unchanged in more than 15 years despite repeated gas crises triggered by Moscow cutting off supplies.
The policy paper also confirms that EU competition authorities are investigating the Russian state energy company Gazprom for its “unusual business behaviour”. The Russian company’s EU storage facilities are only 16% full, compared with 44% for non-Gazprom storage, raising suspicions that the Kremlin is using gas as a geopolitical tool.
The European Union is in the grip of a “growing gas crisis” aggravated by its dependency on Russia, the European Commission will say in a paper out on Tuesday. A line that could have been written many times in the last 15 years or so.https://t.co/bovhehOD71
— Jennifer Rankin (@JenniferMerode) March 7, 2022
Larry Elliott: West feeling impact of Russia sanctions too as oil and gas prices soar
One of the ironies of the war in Ukraine is that the Kremlin’s finances benefit every time the crisis deepens, our economics editor Larry Elliott writes.
After Saudi Arabia, Russia is the second biggest exporter of crude oil, and it is out on its own as an exporter of natural gas.
Countries producing more oil and gas than they consume enjoy windfall gains when prices rise – and Russia falls into that category.
Conversely, countries not self-sufficient in energy suffer when prices are high because costs for business rise and consumer spending power is squeezed. There is a lively debate about whether the US is self-sufficient in energy, but it is certainly a lot less dependent on imports than the European Union, which gets 40% of its natural gas from Russia.
Europe is a lot more vulnerable to a loss of Russian energy supplies than the US, and that helps explain why the German chancellor, Olaf Scholz, is more cautious than Washington over extending the west’s sanctions regime to oil and gas – at least for now.
Here’s Larry’s full analysis:
Updated
Three more Russian billionaires have resigned from the board of the $22bn (£17bn) investment firm LetterOne after the EU imposed sanctions on its two biggest shareholders.
The company, which owns the health retail chain Holland & Barrett in the UK and a swathe of energy assets across Europe, said on Monday that German Khan, Alexei Kuzmichev and Andrei Kosogov had “resigned from all positions at LetterOne, including the board”.
It said:
“None of these three individuals has been sanctioned, but they believe that this is the right thing to do in the long-term interests of LetterOne, its employees and the many jobs it supports in its portfolio companies.”
Last week the UK-based Russian billionaire oligarchs Mikhail Fridman, LetterOne’s founder, and Petr Aven, who between them own just under 50% of LetterOne, had their shares in the company “frozen” after they were hit with EU sanctions following Russia’s invasion of Ukraine. The pair then stepped down from the London-based investment group.
Mervyn Davies, the company’s chair and a former Labour trade minister, said he was determined to stay on at L1, despite repeated calls for him to step down.
“The new board and I will focus on protecting the enormous economic and social contribution LetterOne makes,” Lord Davies said.
“I am also determined to ensure that the 120,000 jobs throughout the UK, US and Europe are protected. We know that everyone involved in L1, including our founders, would want us to take these steps given their love and passion for and heritage in Ukraine.”
Tom Tugendhat, a Conservative MP and the chair of the foreign affairs committee, told the Mail on Sunday that Davies should step down. “Some moments demand a choice, this is one,” he said.
Davies said LetterOne would make a $150m donation to “support the urgent work under way to help those affected by the war in Ukraine”.
Germany's DAX index in bear market
Germany’s benchmark share index has fallen into a bear market, as the Ukraine war threatens to push Europe’s largest economy into recession.
The DAX index of 40 leading German companies has closed 2% lower tonight, and more than 20% off its record closing high set in January.
Germany’s reliance on Russian energy imports, and the pressure on banks and car manufacturers, means the DAX has been particularly hit by the escalating conflict in Ukraine.
Today’s losses have left the Dax at its lowest level since November 2020, meaning it has lost all its gains since the succesful Covid-19 vaccine trials from Pfizer, Moderna and AstraZeneca spurred the global economic recovery last year.
#Germany's Dax slumps >21% from recent high and closed in bear market territory. pic.twitter.com/QayScvybWQ
— Holger Zschaepitz (@Schuldensuehner) March 7, 2022
The Euro Stoxx 50 of ended 1.2% lower, also closing in a bear market.
MIchael Hewson of CMC Markets says:
In what has been a turbulent Monday session, European markets plunged sharply at the open on reports that the US was discussing the prospect of a total ban on Russian oil, which briefly sent Brent crude oil prices spiking up to $140 a barrel in Asia.
This spike higher proved to be rather short-lived, but it also highlighted how fickle market sentiment is, and is likely to remain, and while prices have since retreated from those intraday highs, they are still up on the day.
While the US could probably get away with banning oil imports, it is clear that the case for doing so in Europe is a much harder one to make, with Germany pushing back by saying it would not do so.
The UK’s FTSE 250 index of medium-sized firm also racked up fresh losses today.
It dropped 1.1% to a new 16-month low.
Oxford Instruments, which makes x-ray tubes, optical imaging and microscopy tools, tumbled almost 23% after the rival precision equipment manufacturer Spectris abandoned its £1.8bn takeover offer today.
Spectris blamed the market volatility sparked by Russia’s invasion of Ukraine, saying this morning:
“With the invasion of Ukraine, the world has changed since our proposed offer was made regarding a combination of our businesses, bringing a high degree of uncertainty to the economic outlook around the world.
“While we believe this combination is a great opportunity for both companies, the timing is no longer right and we have brought our discussions to a close.”
Travel firms were also among the fallers, with easyJet down 7.5% and the package holiday group TUI 6.8% lower, while the real estate investment trust Hammerson fell almost 10%.
Updated
FTSE 100 closes lower
After another day of market turmoil, the UK’s FTSE 100 index has finished the session at its lowest close in more than five months.
The blue-chip index has closed 28 points lower at 6,959 points, the lowest close since September 2021, adding to last week’s losses (the index’s worst week since March 2020).
The Ukraine crisis continued to hit banks, travel companies, retailers and consumer goods makers, on concerns that inflation will surge and growth will weaken, pushing up unemployment.
The engineering group Melrose fell 6.7%, the insurer Prudential lost 6.1%, and the airline group IAG shed 5.9%, while NatWest and Lloyds dropped 4%.
But the surge in commodity prices pushed up Shell (+8%) and BP (+3.8%), and miners such as Glencore (+3%).
The Russian steel and mining business Evraz rose 28% but has still lost three-quarters of its value this year as the invasion of Ukraine led to a collapse in its share price.
Updated
The UK tax authority has withdrawn petitions to close down four Liberty Steel companies, giving breathing space to the GFG Alliance metals empire presided over by Sanjeev Gupta.
Gupta’s collection of metals companies, including steel, aluminium and energy plants, has been struggling for finance for a year since the collapse of its main lender, Greensill Capital. The companies are said to employ as many as 35,000 people around the world.
The UK winding-up petitions, revealed last month, threatened the jobs of 3,000 workers across five plants, mostly in the north of England, including relatively large mills making speciality steel in Rotherham and Stocksbridge in South Yorkshire.
That threat appears to have receded with the HMRC deal, although GFG also announced that workers at Liberty Pressing Solutions in Coventry had been put into consultations about a possible closure of the plant.
The factory had 580 employees, according to its latest accounts, for 2019, but it is thought there are now only about 200 workers who could be made redundant.
Updated
Gas prices have eased back from their morning surge but are still at painful, unprecedented levels.
Wholesale natural gas for next-day delivery in the UK is now up 10% today at 515p per therm.
That’s still a desperately high price, and more than 10 times higher than a year ago, having hit 670p/therm in early trading.
The price of gas for delivery in April is now up 13% at 520p per therm, having hit an astonishing 800p earlier.
....EU and UK gas prices have come down dramatically - now up 15-18% on the day (from 50-80% gains this morning). pic.twitter.com/KvyU1E2S0N
— Ben Chu (@BenChu_) March 7, 2022
Updated
The sanctions that have been imposed on Russia following the invasion of Ukraine could push up inflation and hit the UK economy, MPs heard today.
Neil Shearing, the chief economist at Capital Economics, told the Treasury select committee that the sanctions could add an extra percentage point to UK inflation.
Gross domestic product (GDP) might take a hit of between 0.25% to 0.5% because of the sanctions.
This does not mean the economy will shrink, just that it will grow less rapidly, he told the committee.
This is based on current sanctions, which include those on Russian banks and oligarchs. However, any future potential sanctions on energy are not included.
Should the west sanction Russian oil and gas then these hits might be doubled, he said.
“By far and away the most significant hit to the UK economy at the moment is going to come through the effect on energy prices and the cost of our imports, not because we import a lot from Russia, but because global prices have gone up.”
MPs also heard that the UK was “in uncharted territory” over its sanctions against Russia, as Chloe Chaplain of the I newspaper reports:
At @CommonsTreasury discussion on sanctions, Tom Keatinge, of Centre for Financial Crime and Security Studies, says UK 'in unchartered territory' adding 'using sanctions against a country so integrated with the west is unprecedented'
— Chloe Chaplain (@ChaplainChloe) March 7, 2022
He says measures are pushing Russian President Vladimir Putin to 'decide whether he wants to fund his country or his military'
— Chloe Chaplain (@ChaplainChloe) March 7, 2022
Angela Eagle asks what the most impactful of the sanctions seen so far would be
— Chloe Chaplain (@ChaplainChloe) March 7, 2022
She is told that, from an economic perspective, the central bank sanctions are ‘causing the most acute pain’ to Russia at present
Justine Walker, global sanctions specialist, says governance of sanctions is not currently able to keep up with speed of policy announcements
— Chloe Chaplain (@ChaplainChloe) March 7, 2022
She says details have been lacking or delayed, which makes it hard for private sector to then implement these
Julie Marson asks what's missing from overall package of sanctions UK is implementing against Russia
— Chloe Chaplain (@ChaplainChloe) March 7, 2022
Walker says there is still a significant amount of permissible trade and that current sanctions are not full scale asset freezes - describes it as a 'jigsaw of measures'
Keatinge says Chancellor must communicate about impact sanctions will have on cost of living here
— Chloe Chaplain (@ChaplainChloe) March 7, 2022
'This is going to have a significant impact and we need to think about how we are going to mitigate those risks - these are the costs we have to bear to support people of Ukraine'
Shearing says he would estimate impact on UK economy of sanctions to be a 1% increase to inflation (and hit to real incomes) and about 0.5% off GDP compared with prev expectations
— Chloe Chaplain (@ChaplainChloe) March 7, 2022
If energy included in sanctions, says he would double the size of those predictions
Updated
The US stock market has started the week with fresh falls.
The Dow Jones industrial average of 30 large US companies has dropped by over 1%, currently down 412 points at 33,202.
The broader S&P 500 index is down 1.3%, with travel stocks, banks, consumer goods makers and technology stocks all weaker, while energy stocks are rallying.
Updated
Boris Johnson signals opposition to US idea for Russian oil import ban
The UK prime minister, Boris Johnson, and the Dutch PM, Mark Rutte, have signalled their opposition to a ban on Russian energy imports, which the US had been pushing for.
At a Downing Street press briefing in London, Johnson said it was not possible to simply close down imports of oil and gas from Russia overnight – which rather chimes with Olaf Scholz’s statement.
Johnson argued that countries should all move in the same direction and accelerate the move away from dependency on Russian energy supplies.
He said:
“I think there are different dependencies in different countries, and we have to be mindful of that.
“And you can’t simply close down use of oil and gas overnight, even from Russia - that’s obviously not something every country around the world can do.
“We can go fast in the UK, other countries can go fast, but there are different dependencies.
“What we need to do is make sure we are all moving in the same direction, and we all share the same assumptions and we accelerate that move, and I think that is what you are going to see - you’ve heard that from leaders around the world.
“But clearly there is going to be a transitional period, we are going to have to look for supply, we are going to have to look for substitute supplies from elsewhere and we are going to have to do it together across the entire coalition of countries that is now condemning Putin’s actions.”
Johnson signals opposition to US idea for Russian oil import ban - https://t.co/8P5xjRGR7a
— AndrewSparrow (@AndrewSparrow) March 7, 2022
Rutte said there would be a “painful reality” as countries looked to move away from Russian energy dependency.
He said sanctions must not create “unmanageable risks” to European energy supplies, but that over time Europe must reduce its reliance on Russian energy.
Andrew Sparrow’s Politics Live blog has full details:
Dutch PM Mark Rutte suggests ban on Russian energy imports cld be "mistake" that wld create "unmanageable risk" on supplies.
— Pippa Crerar (@PippaCrerar) March 7, 2022
Boris Johnson: "You can't simply close down use of oil and gas overnight, even from Russia, it is not something every country around the world can do."
Updated
Fears of European bans on Russian oil – and potential retaliation or follow-up moves in gas or other commodities – have subsided through today’s session, says Craig Erlam of OANDA.
Having jumped 18% last night to $139 a barrel, Brent crude has now dropped back to around $123 – still up 4% today, meaning inflationary pressures are still intense.
Gas prices have also eased a little, but the wholesale price of next-day delivery in the UK is still up 20% today at 565p per therm.
Erlam explains:
On the one hand, without German support, an EU ban on Russian oil imports looks highly unlikely and the pivot away will take years. But then there’s a lot that’s happened in the last couple of weeks that looked highly unlikely a month ago and the situation continues to evolve rapidly.
The risks remain firmly tilted to the upside as far as oil prices are concerned. Downside risks primarily focus around Ukraine and Russia finding common ground and based on the current demands, that does not look likely any time soon.
Updated
Bloomberg says Olaf Scholz has poured cold water on efforts within the EU to impose sanctions on Russia’s oil and gas sector (see last post).
German Chancellor Olaf Scholz said he opposes cutting off energy supplies from Russia, calling imports of oil and gas of “essential importance” to the European economy.
While the European Union faces an urgent task of finding alternatives to Russian energy supplies, “this won’t happen overnight,” Scholz said Monday in a statement. “It’s therefore a conscious decision on our part to continue the activities of business enterprises in the area of energy supply with Russia.”
Heating, transport and electricity cannot be secured in the short term without these imports, he added.
More here: Germany Signals Opposition to Cutting ‘Essential’ Russian Energy
OIL MARKET: Brent and WTI giving up most of their gains as Germany comes strongly against Russian oil and gas ban. "It’s therefore a conscious decision on our part to continue the activities [...] in the area of energy supply with Russia," says German Chancellor Olaf Scholz #OOTT
— Javier Blas (@JavierBlas) March 7, 2022
LATEST: Scholz put the brakes on discussions about imposing restrictions on Russian oil and gas imports, saying that supplies from Russia are of “essential importance” to the European economy https://t.co/OVcl2o7AZ3
— Bloomberg Politics (@bpolitics) March 7, 2022
Germany's Scholz pushes back against ban on Russian energy imports
The German chancellor, Olaf Scholz, has pushed back against calls to ban Russian oil and gas imports, as part of western sanctions against Moscow over its invasion of Ukraine.
In a statement, Scholz cautioned that such a move could put Europe’s energy security at risk, and that energy imports from Russia were currently essential to citizens’ daily lives.
Scholz said:
“Europe has deliberately exempted energy supplies from Russia from sanctions.
“Supplying Europe with energy for heat generation, mobility, electricity supply and industry cannot be secured in any other way at the moment. It is therefore of essential importance for the provision of public services and the daily lives of our citizens.”
Scholz’s comments come a day after the US secretary of state, Antony Blinken, said the US was in talks with European allies about banning imports of Russian oil, to intensify the pressure on Moscow to halt its invasion of Ukraine.
Blinken’s comments had sent Brent crude oil soaring to 14-year highs of $139 per barrel.
But Brent has now dropped back to around $120, up 2% today.
In his statement, Scholz defended a decision by the European Union to spare Russia’s energy sector from sanctions over its invasion of Ukraine. He argued that Russian energy was needed until alternatives sources were found.
“The federal government has been for months working urgently with its partners in the European Union and beyond to develop alternatives to Russian energy.
“This cannot be done overnight.”
Olaf Scholz makes clear that Germany is not considering cutting off Russian gas, saying energy has been deliberately exempted from the sanctions because it's vital for heating, electricity, mobility and industry. pic.twitter.com/20PErI7uAy
— Noah Barkin (@noahbarkin) March 7, 2022
#BREAKING Russian energy imports 'essential' to Europeans' daily lives, cautions against oil and gas sanctions: German Chancellor Scholz pic.twitter.com/FlIL4sENtn
— AFP News Agency (@AFP) March 7, 2022
JUST NOW
— Richard Walker (@rbsw) March 7, 2022
Olaf Scholz statement insisting Germany will continue using Russian energy supplies.
“Working hard” on alternatives but “this cannot be done overnight.”
German statement + DeepL translation-> pic.twitter.com/H5rgi40aq3
Seperately, the finance minister, Christian Lindner, has said Germany is not currently planning to stop importing Russian oil, gas and coal but is keeping the option open.
“This option is of course on the table,” Lindner told reporters (via Reuters).
“At this point in time, however, it seems advisable for the sustainability of the sanctions against Vladimir Putin not to take this step ourselves.”
Lindner added:
“I do not rule out anything for later this year.”
Updated
Chart of the Day: Wholesale gas prices in the UK have reached an unprecedented 650 pence per therm, after expectations of supply disruption from Russia. https://t.co/uk6DU95i1P pic.twitter.com/Up6OGSI5WV
— The New Statesman (@NewStatesman) March 7, 2022
The National Grid Electricity System Operator (ESO) is announcing a “trailblazing” greener way of generating inertia in the electricity grid, to make the UK less reliant on gas supplies, including those from Russia, my colleague Rob Davies writes.
If all goes to plan, it could also reduce carbon emissions, rein in household bills and recoup the £336m investment funding it.
In the electricity system, inertia is crucial in maintaining a stable electrical frequency on the grid, keeping the lights on. In August 2019, more than 1 million people across the UK were plunged into darkness during one of the worst power blackouts in more than a decade, after the frequency of the grid fell from its usual 50Hz to 48.88Hz.
That unprecedented loss of power generation was caused by a lightning strike, but outages can happen for other reasons too, causing a sudden shortfall that knocks the system’s frequency off kilter.
As things stand, the grid system usually balances itself automatically thanks to the inertia held in massive spinning turbines at coal and gas power stations – much like a spinning top, but 19.5 metres (64ft) long and made of 300 tonnes of steel and aluminium.
They respond instantaneously to a power outage happening elsewhere, spinning ever so slightly slower to offset the disruption and keep the system stable.
However, these giant turbines are not a feature of wind or solar power generation, meaning that as the UK aims to decarbonise the electricity grid by 2025 as part of efforts to hit net zero, inertia needs to come from somewhere else.
The solution, according to National Grid ESO, whose job it is keeps the electricity network in check, is a series of green turbines created to mimic the effect of their cousins at carbon-emitting fossil fuel plants.
With only a small amount of energy fed into them, they can spin at the required rate of 3,000RPM, the speed that ensures synchronicity with the 50hz Grid system.
The result, in theory, is a solution to the problem of creating inertia in an increasingly wind- and solar-powered electricity system, allowing for a faster push away from fossil fuels that emit carbon and line the pockets of countries such as Russia.
Here’s the full story:
Updated
UK gas prices are continuing to climb, with the day-ahead wholesale contract now up 41% today - to a record 660p per therm.
That’s up from around 45p a year ago.
Updated
Market update: off the lows
After a fraught morning, European stock markets are recovering from their lowest levels this session.
In the City, the blue-chip FTSE 100 is now down 0.4% or 30 points at 6966 points, having hit a seven-month low of 6,788 points in morning trading.
Mining stocks and oil companies continue to rally, after oil hit its highest since 2008 and nickel prices soared as much as 30% to a 15-year high.
Banks, travel companies, technology companies, retailers and consumer-goods makers are all still weaker, with grocery tech firm Ocado down 5.4%, drinks group Diageo down 4.4%, Next down 4.3% and Lloyds Banking Group 4.2% lower.
Across Europe, Germany’s DAX is off 1% and France’s CAC is 0.8% lower, having both been down 4.5% at one point.
Updated
Russia’s rouble has tumbled to a fresh record low today.
Russia’s currency is down around 8% at 131 to the dollar, according to Refinitiv data. On the EBS trading platform, the rouble weakened as far as 141.00 to the dollar.
The rouble started the year at around 75 to the US dollar, before plunging to record lows as the invasion of Ukraine began last month.
Bid/offer spreads were between 10 and 15 cents, pointing to an increasingly illiquid market in thin trading, Reuters points out.
Trading on the MOEX Moscow exchange is scheduled to be closed until Wednesday for a bank holiday.
The possibility of a US ban on Russian crude imports adds to the heavy pressure on the rouble, with Russia’s economy facing a severe recession.
🇷🇺 - Russia has entered its fourth financial crisis in 25 years
— Agathe Demarais (@AgatheDemarais) March 7, 2022
• Sanctions on Russian central bank mean Moscow cannot prop up rouble, which is in free fall
• Russia will register double-digits recession this year, likely worse than 1998 but milder than 1992 pic.twitter.com/SGLqCSzwD6
Marc Ostwald, chief economist & global strategist at ADM Investor Services, says:
Leaving aside the official imposition of energy sanctions on Russia, there are already a large number of companies in the energy and many other sectors that are now ‘self-sanctioning’, i.e. halting all business with Russia, which will have a) devastating effects on the Russian economy; b) leaves many questions about whether there is capacity elsewhere to compensate for this loss of supply (oil, gas, fertiliser, grains, oilseeds, copper and palladium are just a few of these); c) may already lead start to result in involuntary inventory accumulation in some finished goods, but above all even more acute problems for the semiconductor sector, and per se auto and mobile phone makers.
Updated
Investor morale across the eurozone has plunged, following the Russian invasion of Ukraine.
Research group Sentix’s index of eurozone investor confidence fell to -7.0 in March from 16.6 the previous month, hitting its lowest level since November 2020.
An expectations sub-index fell to -20.8 in March from 14.0 in February, the lowest reading in nearly a decade and the biggest drop in the Sentix index’s 20-year history.
Sentix said the eurozone economy was being dramatically hit by the Ukraine crisis, adding that the eastern European region was particularly suffering. More here.
🇪🇺 Euro zone investor morale plummets in March on Ukraine crisis - Reuters
— PiQ (@PriapusIQ) March 7, 2022
~ Sentix's index for the euro zone fell to -7.0 in March from 16.6 the previous month, hitting its lowest level since November 2020. A Reuters poll of analysts had pointed to a March reading of 5.3.
🇪🇺 An expectations sub-index fell to -20.8 in March from 14.0 in February, the lowest reading in nearly a decade and the biggest drop in the Sentix index's 20-year history.
— PiQ (@PriapusIQ) March 7, 2022
~ A current conditions sub-index, meanwhile, fell to 7.8 in March from 19.3 in February.
Last weekend the president of the World Bank told the BBC that the war in Ukraine was “a catastrophe” for the world and would cut global economic growth.
“The war in Ukraine comes at a bad time for the world because inflation was already rising,” said David Malpass, pointing out that rising energy and food prices hit the poorest hardest.
Malpass stressed his biggest concern was “about the pure human loss of lives” that was occurring.
Updated
Last week’s 13% gain for @Bloomberg Commodity Spot index was largest on record (going back to 1960) pic.twitter.com/7upG87VsN1
— Liz Ann Sonders (@LizAnnSonders) March 7, 2022
Average petrol prices in the UK have exceeded 155p per litre for the first time as oil prices continue to soar due to Russia’s invasion of Ukraine.
Figures from data firm Experian Catalist show the average cost of a litre of petrol at UK forecourts on Sunday was 155.62p, while the price of diesel reached a record high of 161.28p.
A year ago the price per litre of petrol and diesel was 124.32p and 127.25p respectively.
Today’s rise in the oil price, with Brent crude hitting $139 per barrel before dropping back to $125/barrel now, could push prices even higher.
RAC fuel spokesman Simon Williams said (via PA Media) that:
“These hikes are unprecedented and will sadly be hitting both homes and businesses hard.
“It’s therefore vital the Chancellor acts quickly to limit the damage by cutting VAT to at least 15% which would save drivers 6.5p a litre and take the average price of unleaded back under £1.50.
“Importantly, this could also limit the impact of inevitable fuel price rises in the coming days and weeks.”
AA spokesman Luke Bosdet said the average petrol price rising above £7 a gallon was a “watershed moment” which means “it’s time to ditch petrol and diesel, and switch to electric” for drivers who can make the transition.
“Although electricity is still susceptible to rising costs and market pressures, removing all those well-to-pump actors that can make a driver’s life a misery in a matter of weeks, will ensure a smoother ride with the cost of motoring - and a big saving initially.”
Pump prices in the UK continue to rise. Averages now nearly £1.56 a litre for unleaded, £1.61 for diesel #CostOfLivingCrisis #Petrol #PetrolPrice ⛽️
— RAC Press Team (@RACPress) March 7, 2022
EY, KPMG and PwC cut ties with Russia operations
EY has followed its rivals and fellow big four global accountancy firms, KPMG and PwC, by cutting off businesses in Russia and Belarus, piling pressure on Deloitte, which has yet to pull out.
The businesses will not necessarily close down but they will be legally separated, in the latest example of multinational firms responding to the invasion of Ukraine by pulling out of Russia. KPMG has more than 4,500 workers and partners in Russia and Belarus, while PwC has 3,700 and EY has 4,700.
KPMG and PwC confirmed the businesses will no longer be able to use their brands or name once separated.
Companies across the world have been scrambling to work out their exposure to Russia after the US, EU and UK sought to isolate it economically with sanctions. None of those have imposed blanket bans on Russia or Belarus, which supported the invasion by its bigger ally, but many have judged that reputational or financial risks were too great.
More here:
This latest surge in energy prices will have an immediate impact on companies, driving up costs and creating the risk of demand destruction at energy-intensive companies.
Peter Garnry, head of equity strategy at Saxo Bank, says:
The galloping commodity prices will naturally put downward pressure on the economy and increase operational volatility for many companies already struggling with inflationary pressures.
An import ban on Russian oil and gas would immediately put Europe into a rationing mode to preserve and allocate oil and gas to the most important sectors of the economy first.
If prices don’t come down, UK consumers would face another jump in energy bills this autumn.
The price cap on UK bills will rise by 54% next month, taking the average bill up to £2,000. Experts have already predicted bills could rise again to as much as £3,000 in October when Ofgem next sets the price cap.
UK gas prices opening at 610p/ therm for April delivery. A thirteen st. dev. move. No economic modelling conducted in recent months will be capturing the rotation in spending power away from UK households. Some huge revisions coming - not least in this month's Spring Statement pic.twitter.com/O4L7K3uMol
— Simon French (@shjfrench) March 7, 2022
The Conservative peer Greg Barker has resigned as chairman of EN+, the mining company part-owned by the sanctioned Russian oligarch Oleg Deripaska.
Lord Barker, an energy minister in David Cameron’s government, oversaw a plan to help the firm respond to US government sanctions levelled against the company and Deripaska in 2018, when it sanctioned the oligarch over his alleged links to the Russian government. Deripaska has previously said the US allegations were based on “false rumour and innuendo”.
Barker’s resignation comes amid intense scrutiny of companies linked to sanctioned Russian oligarchs, alleged by authorities in the US, EU and UK to be part of the system through which Vladimir Putin controls the Russian economy.
Here’s the full story:
UK and European gas prices hit fresh record highs
Wholesale gas prices in the UK and in Europe have jumped to fresh record highs this morning, as the inflationary squeeze intensifies.
The price of gas for delivery in the UK in April is up over 30% at 650p per therm, driven by concerns of supply disruption and sanctions on Russia.
The contract surged as high as 800p in early trading, up from 460p on Friday.
A year ago, gas was trading at around 40p per therm, before last autumn’s energy price crunch.
NEW
— Faisal Islam (@faisalislam) March 7, 2022
Wholesale gas prices in UK reached utterly incredible new record of 800 pence per therm this morning before settling at 650p a few moments ago. Expectations of sanctions/ supply disruptions from Russia - traders bidding up prices for other LNG tankers… pic.twitter.com/xXBnq0cRrQ
Wholesale UK gas prices up 73% benchmark prices top 800p a therm pic.twitter.com/pBEufRkKK3
— Richard Fletcher (@fletcherr) March 7, 2022
Gas for next-day delivery in the UK has also hit a record high, up almost 30% at 605p per therm.
European energy prices also hit fresh records after the U.S. said it was considering curbs on imports of Russian oil, a move that would add to supply fears across commodity markets.
Benchmark gas prices jumped 79% to as high as €345 per megawatt-hour, as Bloomberg reports::
Dutch front-month gas, the European benchmark, soared to a high of 345 euros a megawatt hour, and was 74% higher at 335.04 euros as of 9:32 a.m. in Amsterdam. The U.K. equivalent contract rose 74% to an unprecedented 800 pence a therm. German month-ahead power surged 60% to 675 euros a megawatt-hour, also a record high
“I’m lost for words,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S. “By now only very few traders besides those who have a commercial interest is likely to be trading this market.”
European gas prices at all record highs, gracing 330 Eur/MWh -- in excess of $575 a barrel of oil equivalent -- , up 72% so far today, as fears over Russian gas supply cuts mount with the prospect of new energy-specific sanctions. #OOTT #Europe #energyprices pic.twitter.com/8cKNJYmzNS
— Patricio Alvarez (@PatAlvarezB) March 7, 2022
UPDATED: European natural gas prices zoom to a fresh all-time high, rising >75% today. Benchmark TTF is trading above €345 per MWh.
— Javier Blas (@JavierBlas) March 7, 2022
** That's equal to more than $100 per million Btu, or more than to $600 a barrel of oil equivalent ** (I promise you there are not typos there).
As oil and gas rockets in price and worries about the effect on global growth rise, the spectre of stagflation is hovering over financial markets, says Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown:
Russia looks increasingly embedded in the conflict, and with relentless bombardments of Ukrainian cities and human tragedy continuing, speculation is that the US and Europe will retaliate by banning Russian energy exports. That would would have a richochet effect on their economies, with a supply squeeze on global markets, pushing up prices for industries across the board and making the cost of living crisis even more painful. This piles pressure on central bank policymakers, who are faced with the increasingly difficult tightrope to tread of trying to bring down inflation by raising rates, which will make overall costs more unbearable, potentially tipping economies back into a downturn.
A barrel of Brent crude jumped 15% earlier to its highest point since 2008, spiking at $139, before settling back at just over $126. This is still a very uncomfortable level for companies and consumers who are set to pay the price in terms of yet higher higher transport costs.
European natural gas prices have exploded since the start of the year and soared to fresh all time highs above €240 per megawatt-hour earlier today. If Russian exports are turned off, it will leave a huge gap in European energy needs, given the country accounts for more than 30% of the region’s natural gas imports.
Updated
The Swiss National Bank has repeated its pledge to intervene on the currency markets if needed after the Swizz franc briefly rose above parity with the euro, as investors sought safe-haven assets.
Reuters has the details:
“The Swiss franc is currently sought after as a refuge currency, along with the US dollar and the yen,” the central bank said in a statement.
“The Swiss franc continues to be highly valued,” it added. “The SNB remains prepared to intervene in the foreign exchange market if necessary.”
The euro/franc exchange rate fell to 0.9910 in Asia overnight, as investors sought refuge in the currency due to the conflict in Ukraine. The valuation is the highest level for the
franc since January 2015 when the Swiss central bank scrapped its peg to the euro.
The SNB said the increased valuation also recognised the inflation differentials between Switzerland and other countries.
EURCHF at parity…
— Diego Parrilla (@ParrillaDiego) March 6, 2022
Will SNB intervene? pic.twitter.com/DSEIsXjTmh
FTSE 250 index tumbles 3.75%
Britain’s more domestically-focused FTSE 250 index has fallen 3.75% this morning, to its lowest in over a year.
Travel companies such as airline Wizz Air (-12%), holiday firm TUI (-9.7%), and ticket firm Trainline (-9%) are among the top fallers, along with Georgian bank TBC (-9.5%).
High-tech manufacturer Oxford Instruments are down 25%, after British electrical engineering firm Spectris Plc ended talks regarding a possible bid for the company.
The FTSE 250 is now at its lowest level since November 2020 (when Pfizer’s Covid vaccine success sparked a global rally), down 731 points at 18,655 points
Updated
Eurozone bank shares are on track for their worst day since March 2020, Reuters reports, with the sector down 9.2% this morning.
Europe’s auto sector has fallen to its lowest level since November 2020, falling around 6% today, and almost a quarter since the start of this year.
Germany's DAX falls into bear market territory
The DAX index, of Germany’s largest companies, has fallen into bear market territory this morning.
It’s down over 20% from its record highs last November.
🇩🇪📉 Germany's Dax Down 3.7%, On Course To Confirm A Bear Market After Suffering 20% Declines Since Jan Closing Record High - Reuters pic.twitter.com/MJ3HL7VNpS
— PiQ (@PriapusIQ) March 7, 2022
Germany's Dax starts the week 3.8% lower, now down 22.6% from the recent high and so in bear market territory! pic.twitter.com/Sp5sAxjcHU
— Holger Zschaepitz (@Schuldensuehner) March 7, 2022
Europe’s stock markets have fallen to a fresh one-year low this morning, hit by the possibility of a US and European ban on Russian oil imports.
The Stoxx 600 index of Europe’s largest 600 companies has fallen over 3%, taking its losses in 2022 to 16%.
Germany’s DAX and France’s CAC have both fallen by 4.5% this morning, with Italy’s FTSE MIB down almost 6%.
Jim Reid, strategist at Deutche Bank, says the surge in the oil price has meant a fraught start to the week for markets.
There hasn’t been much new news over the weekend that progresses the narrative on the conflict and it’s looking more likely that this will be an attritional battle absent a major development.
For economies and markets, especially in Europe it then depends on whether the gas (and to a lesser extent oil) continues to flow from Russia to the continent. At the moment it seems the European governments are keen for the gas flow to continue (assuming Russia does) but I suppose a risk to this scenario is that public opinion becomes increasingly against that scenario and politicians have to respond.
The news out of the US over the weekend shows the momentum is building for fiercer sanctions on Russia.
London open: FTSE 100 drops 2% to five-month low
In the City, the FTSE 100 index has dropped 2% in early trading, as fears over the Ukraine war continue to hammer shares.
The blue-chip index is down 141 points at 6845 points, its lowest level since last September.
Travel stocks are tumbling, with British Airways parent company IAG down 9%. Bank stocks are also sharply lower, with Lloyds, Barclays and NatWest falling over 8%.
But miners and oil producers are surging, following the rise in commodity prices. Shell has jumped 4%, while Anglo American is up 5.8%.
Updated
Cleverly: UK will consider Russia oil ban
The UK’s Europe minister, James Cleverly, has said Britain will consider banning oil imports from Russia, after U.S. Secretary of State Antony Blinken said the United States and Europe were exploring the idea (sending crude prices surging).
Cleverly told Times Radio that:
We import very, very little Russian hydrocarbons anyway. So that’s something that we will of course, consider.
Our Ukraine liveblog has more details:
Full story: Oil prices soar 10% and stocks plunge as US and Europe consider ban on Russian crude
Oil prices are approaching their all-time highs after the risk of a US and European ban on Russian crude threatened a stagflationary shock for world markets, my colleague Martin Farrer reports:
Mohamed El-Erian, chief economist at the insurer Allianz, said that it appeared likely that the new sanctions would be imposed given the continued bombardment of Ukrainian cities.
“It’s hard to see such sanctions not being imposed given the atrocities being committed against Ukraine,” he said on Twitter.
Bank of America chief economist Ethan Harris said cutting off most of Russia’s energy exports would be a “major shock to global markets”, adding that the loss of Russia’s 5m barrels could see oil prices double to $200 a barrel.
Mike Muller, of commodity trading firm Vitol, also said prices could rise further. “I don’t think we’ve priced in everything yet,” he said.
Thanks @FerroTV for your heads up tweet on this.
— Mohamed A. El-Erian (@elerianm) March 6, 2022
Brent #oil is currently trading above $130 in Asia as talk of western sanctions against oil and gas from #Russia intensifies.
It’s hard to see such sanctions not being imposed given the atrocities being committed against #Ukraine. pic.twitter.com/SwItIaoohz
To put this into context, #oil is now more than 60% in 2022 and, as noted in Saturday’s tweet, it is not only commodity that has recorded stunning price gains this year. There are many more … and with notable spillover effects as will be detailed this week in my @ProSyn post.
— Mohamed A. El-Erian (@elerianm) March 7, 2022
Here’s the full story:
Introduction: Markets slide as oil hits highest since 2008
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Global financial markets are set for another day of turbulence as the war in Ukraine drives up the oil price towards record levels and threatens a stagflationary shock to Europe’s economy.
Oil has surged to its highest level since 2008, after U.S. Secretary of State Antony Blinken said Washington was in “very active discussions” with European governments about banning imports of Russian crude and natural gas.
Brent crude hit $139 a barrel overnight, a jump of 20%, before slipping back to around $129/barrel now --- still up 9% today.
This surge has increased concerns that the world economy could face stagflation, with consumer prices surging, and slowing growth pushing up unemployment.
Asia-Pacific markets have already slumped into the red again, with China’s CSI 300 index tumbling to a 20-month low.
The world will experience an energy shock, it’s just now a question of how big it is and long it lasts, writes Kyle Rodda of IG:
Equities seem to be having an “Oh (pick your expletive)” moment, as the US reportedly weighs an embargo on Russian oil that could strangle global growth, fuel inflation and accelerate the trend to a more multipolar world.
Of course, this doesn’t have to come to fruition – sentiment improved this afternoon on reports that the path forward an embargo is “uncertain”. On top of that, the move, which would cripple the Russian economy, could in theory force a backdown from the Russians, and could open the door to a diplomatic solution that could see an end to war, even if that means some ugly land concessions to the Russians from Ukraine. But given the one eyed focus by Putin on toppling the Ukrainian government, it seems more likely this war will drag on, all at the expense of global growth and price stability.
Although it’s too early to tell, this could be the realisation markets have come to today. Stocks are tumbling, the Euro has swooned, and commodity prices are going through the roof.
The Ukraine war also increase the risk of recession in Europe, as Rodda adds:
Commodity prices are soaring, in a mix that’s undoubtedly going to stoke big, scary headlines about stagflation going forward. And that’s not entirely unjustified, given the risk Europe slips into recession if the conflict drags-on, and as food and energy insecurity becomes more wide spread
European markets are set for further heavy losses, adding to last week’s turmoil which saw London’s stock market suffer its biggest weekly losses since the start of the global pandemic in March 2020.
The FTSE 100 is on track to drop over 1%, with other European indices facing deeper losses.
Indices opening levels - EU volatility index..😲😲#ftse #dax #cac @DailyFXTeam Prices via @IGcom pic.twitter.com/IU7POAOe4F
— Nick Cawley 💙 (@nickcawley1) March 7, 2022
As analysts at MUFG put it:
There are growing signs in the financial markets that the fallout from sanctions on Russia following its invasion of Ukraine is spreading, with Europe in particular beginning to show contagion.
The agenda
- 7am GMT: Halifax house price index for February
- 1pm GMT: Treasury Committee investigates effectiveness of economic sanctions on Russia
Updated
