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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Russian bond default ‘imminent’, as inflation jumps; markets surge as oil falls back – as it happened

Russia Ukraine United Kingdom United States Eugene Shvidler British Airways Roman Abramovich European Union Farnborough Farnborough (Geopolitical Entity)
Russian people walk in front of the Foreign Ministry Office building in Moscow, Russia.
Russian people walk in front of the Foreign Ministry Office building in Moscow, Russia. Photograph: Yuri Kochetkov/EPA

Tech and banks lead Wall Street rebound

Traders on the floor of the New York Stock Exchange.
Traders on the floor of the New York Stock Exchange. Photograph: Brendan McDermid/Reuters

A late update: Wall Street drove the global rally onwards, with its best day in around 21 months.

The S&P 500 index of US company stocks has closed 2.5% higher at 4,277 points, up 107 points. That’s its biggest one-day percentage gain since June 2020, with financial stocks and tech firms rebounding.

That’s quite a rebound, after New York saw its biggest drop in over a year on Monday:

Kyle Rodda of says:

Narrative. Flow. Technicals. Sentiment. In the short-run, markets are always driven by these factors more than anything else. In a highly uncertain and volatile environment, this fact only becomes more relevant. For these reasons, it’s why we saw what was the biggest one day rally in US stocks since June 2020.

The key headline sparking it all were reports that Ukrainian President Volodymyr Zelensky is willing to commit to political neutrality – that is, not getting into bed with NATO in any way -- in exchange for a respect of existing Ukrainian borders. If this seems like a possibly trivial and ineffectual commitment, and one that has been effectively made prior to this point, that’s because it is, and has been.

However, last night it capture the hearts of market participants, setting of a relief rally in equities and the Euro, and a drop in the major invasion trades in oil and gold, with the shift in sentiment setting off a short-term technical reversal as flows moved in the opposite direction to the prevailing trends.

Shares were also boosted by the sharp fall in oil prices on Wednesday, with US crude plunging 12%.

Oil’s fall followed reports that the United Arab Emirates could favour an increase in output by Opec, to address market turmoil.

However... energy minister, Suhail al-Mazrouei, has now tweeted that the UAE is committed to the existing OPEC+ schedule of production increases, saying:

“The UAE believes in the value OPEC+ brings to the oil market”

Closing post

A recap....

Rating agency Fitch has warned that a Russian sovereign debt default is imminent, as it slashed the country’s credit rating to its second-lowest notch.

Fitch predicted that the pain of escalating sanctions raised the proospect of at least a ‘selective non-payment’ of its sovereign debt obligations, after the US and the UK both announced bans on Russian oil imports on Tuesday.

Russians are already feeling the economic pain of the crisis. Inflation jumped by over 2% in the first week of the Ukraine war, with consumer prices now 10% higher than a year ago.

With the economy heading into a deep recession, there is clearly much more trouble ahead, with the rouble weakening again this morning.

European stock markets have staged a dramatic rebound today, in their strongest recovery in two years. Germany’s DAX led the way with an 8% gain, as anxiety over the crisis appeared to ease.

In London, banks, travel companies and Russian miners all had a strong day, recovering some of the major losses in the last two weeks.

Oil prices have tumbled, with crude down around 13% tonight on optimism that Opec might boost production. The move has calmed some concerns about inflationary pressures hitting the global economy.

But analysts have cautioned that the markets may be too optimistic, given the air strike on a Children’s hospital in Mariupol today, and Western fears that Vladimir Putin could use chemical weapons on Kyiv.

The EU has added more names to its sanctions list ,including Russian Formula One driver Nikita Mazepin and Russian business leaders.

While the UK government unveiled new aviation sanctions against Russia, toughening up a ban on Russian planes flying or landing in the UK alongside powers to detain any Russian aircraft in the UK.

One private jet has already been seized, and could be linked to billionaire Eugene Shvidler, the close friend and business partner of Roman Abramovich.

The business backlash against Russia gathered more pace, with the owner of KFC and Pizza Hut has joined the ranks of Western brands suspending its operations in Russia.

Kentucky-based Yum! Brands is suspending 70 KFC company-owned restaurants in Russia and finalising an agreement to suspend all 50 Pizza Hut outlets in partnership with its master franchisee.

Mothercare, Heineken and Universal Music Group also announced they were halting operations in Russia.

Tobacco firm Imperial Brands also announced it will halt operations in Russia, but British American Tobacco will continue selling cigarettes in Russia:

While some directors are quitting the boards of Russian firms, others are holding firm:

Fertiliser giant Yara has temporarily cut output at two European plants, due to soaring energy prices.

With fears of food shortages already rising, Irish dairy and beef farmers are being urged to start growing crops. Agriculture ministers from G7 countries including Britain’s George Eustice will meet on Friday to discuss grain shortages and food price volatility amid the war in Ukraine.

Elsewhere, the US labour market remains tight with 11.3m job vacancies at American companies in January.

UK households are the gloomist about financial conditions in a decade, as inflation squeezes incomes.

Also:

Goodnight. GW

Muscovites get used to life without Dior and McDonald’s

A Big Mac burger at the McDonald’s restaurant in Pushkin Square.
A Big Mac burger at the McDonald’s restaurant in Pushkin Square. Photograph: Alexander Shcherbak/TASS

The irony was not lost on some of the Muscovites who were queueing outside a McDonald’s on Tuesday evening, just after the company announced it was temporarily closing its nearly 850 locations in Russia.

“My dad once told me how he waited in a long line when McDonald’s opened when he was young. And now I ended up also queueing, but for a very different reason. History can be funny,” said Dmitry Grigoryev.

When McDonald’s opened its doors in Moscow’s Pushkin Square in 1990, a queue thousands-long formed. Inside and outside the country, the arrival of the golden arches was seen as a definite sign of the end of cold war.

Russians’ embrace of western fast food, pop culture and jeans came to signify the country’s integration into the global capitalist system. Despite rising authoritarianism under Vladimir Putin over the last decade, international brands remained eager to keep their doors open in Moscow and other big cities with a sizable middle class.

But Russia’s invasion of Ukraine on the morning of 24 February changed everything. Since then there has been an unparalleled exit of international firms, among them Toyota, Heineken, Nike, Apple, Exxon, Ford, Zara, Netflix and Ikea.

“The exodus of companies is really stunning,” said Maria Shagina, an international sanctions specialist at the Finnish Institute of International Affairs and the Geneva International Sanctions Network.

“The speed at which this is happening is unknown to modern history. Russia is being completely decoupled from the global commercial, technological and banking communities.”

Here’s the full piece:

Russian F1 driver added to list of people sanctioned by EU

A Formula One driver and a Russian previously linked to a £300m mansion that is London’s second largest house after Buckingham Palace are among 160 individuals added to an EU sanctions list designed to squeeze Vladimir Putin’s “closest circle”.

Nikita Mazepin’s contract with the Haas F1 team was terminated after the invasion of Ukraine. Haas F1 was sponsored by the Russian chemical firm Uralchem, whose general director is Mazepin’s father, Dmitry Arkadievich Mazepin.

Also on the updated list is Andrey Guryev, a fertiliser Russian billionaire, revealed in 2015 to be the beneficiary of an offshore company that owned Witanhurst, a 25-bedroom property in Highgate,north London.

They are among 14 oligarchs and businesspeople on an expanded list of individuals announced on Wednesday whose assets in the EU will be frozen.

EU restrictive measures imposed in response to the invasion of Ukraine and before that to the annexation of Crimea in 2014 now apply to more than 30 Russian businesspeople. This compares to the UK’s sanctions list, which has named just 10 oligarchs since 2014.

Here’s the full story:

We have seen some extraordinary moves in global stocks today, says Neil Wilson, chief market analyst at Markets.com.

But he also cautions that markets may be getting ahead of themselves if they’re optimistic about the Ukraine crisis, especially given a Russian airstrike has reportedly hit a maternity hospital in Mariupol:

Badly beaten down sectors enjoying the flip but it does not look reasonable – it’s like the war ended, and it clearly hasn’t. If anything the strike on a maternity hospital paints an ugly, dark picture of where this is going. Russia is goading West into no-fly zone.

The market has latched on to [Ukrainian president] Zelenskiy’s remarks on compromising and comments from Russia’s Foreign Ministry spokeswoman Maria Zakharova, who said the Kremlin has no intention of occupying Ukraine or overthrowing its government. This could be a significant shift...but events on the ground don’t match with the rhetoric for now. I remember when Macron thought he’d prevented an invasion...just words but the machines are trading the headlines.

British American Tobacco will continue selling cigarettes in Russia, defying a gathering movement among global brands to halt operations there in response to the invasion of Ukraine.

The London-based cigarette manufacturer, whose brands include Lucky Strike and Rothmans, said it would “continue to operate” in Russia, one of its key growth markets for cigarettes and heated tobacco, according to the company’s latest annual report.

It will suspend capital investment and scale back marketing and business activities but stopped short of following its smaller British rival, Imperial Brands, by halting its operations altogether (as covered earlier).

Oil tumbles over 10%

Oil prices are continuing to slide, with Brent crude now down 11% or $14 at $114 per barrel.

That’s a very sharp move, but still leaves oil higher than before the Ukraine invasion (which pushed Brent over $100/barrel).

Hopes that the Opec group could boost production could be pushing the oil price lower.

Retuers reports that:

The United Arab Emirates (UAE) favors an oil production increase and will be encouraging OPEC to consider higher output, the UAE’s ambassador to Washington said on Wednesday.

“We favor production increases and will be encouraging OPEC to consider higher production levels,” Ambassador Yousuf Al Otaiba said in a statement tweeted by the UAE Embassy in Washington.

U.S. Secretary of State Antony Blinken also said on Wednesday that the UAE was giving support for increased oil production.

European markets best day in two years

European stock markets have recorded their best session since the turmoil of the Covid-19 pandemic two years ago, even as the Russia-Ukraine war continues to rage.

Tthe Stoxx 600 index of leading European companies has gained 4.7%, its biggest daily gain since March 2020, as stocks recovered after heavy selling.

Car stocks gained 9.5%, while the travel sector jumped over 8% and the banking sector finished 7.5% higher.

Germany’s DAX index jumped by nearly 8%, just days after falling into bear-market territory on fears the German economy would be particularly hit by the impact of Russian sanctions, soaring commodity prices, and possible disruption to energy supplies.

The mood in the markets has swung around today, and stocks are enjoying a major rally, explains analyst David Madden of Equiti Capital:

The invasion started almost two weeks ago, and stock markets have been hammered. Yesterday, the US announced plans to ban the purchase of Russian energy, and the UK are aiming to phase out oil imports from Russia too. The fact that Western governments seem to be carrying out an economic war against Russia, rather than military conflict, has helped the overall sentiment.

If the violence doesn’t escalate further, it is possible that markets will continue to stabilise. The DAX is up as a mixture of bargain hunting and short covering is driving up the market. Germany’s equity benchmark is arguably the most exposed of the major European stock markets to the Ukraine-Russia situation, and now that sentiment is improving, the index is driving higher.

FTSE 100 index rallies

In the City, the FTSE index has closed 3.2% higher as investors put aside some of their anxiety over inflation and the economic cost of the Russia-Ukraine war.

The blue-chip share index rallied by 226 points to end at 7191 points, a strong rebound that recovers some of its recent losses.

Financial stocks rebounded, as the drop in the oil price today reassured markets [Brent crude is now down over 6% today].

Travel stocks also recovered, with British Airways parent company IAG gaining 11%.

Russia-focused miners led the risers. Gold and metal producer Polymetal surged 69% from a record low yesterday after reporting today that its operations in Russia and Kazakhstan were not affected by the crises, while Evraz (whose stock also tumbled when the war began) gained almost 19%.

The FTSE 100 over the last three months
The FTSE 100 over the last three months Photograph: Refinitiv

Updated

Russian households face inflation surge from slumping rouble

A currency exchange shop in Moscow
A currency exchange shop in Moscow Photograph: Vlad Karkov/SOPA Images/REX/Shutterstock

Russian households are already beginning to feel the pinch from Western sanctions imposed after Vladimir Putin’s invasion of Ukraine, with economists warning that inflation in the country could reach the highest levels seen in at least two decades.

Official figures published by Moscow this afternoon show the collapse in the rouble led to a sharp rise in weekly consumer price inflation, highlighting the early impact from the US, UK and the EU freezing the central bank of Russia’s assets and hurting its ability to defend the currency.

Hitting ordinary Russians hard, consumer prices rose at 2.2% in the week to the 4 March - more than twice the rate seen during the collapses in the rouble during the 2008 financial crisis and in 2014 when a crash in the oil price and western sanctions imposed after Putin’s annexation of Crimea hit the country.

Although officials only produce a limited breakdown, the release showed prices of new domestic cars rose 17.1% and TVs by 15% on a weekly basis.

Inflation rose in February at 9.2%, showing how a squeeze on households before the invasion was already underway.

However, economists at the consultancy Capital Economics said Russian inflation could surge further still close to 20% this year - the highest rate since 2001.

Liam Peach, an emerging markets economist at Capital Economics, explains:

“The collapse in the ruble in response to the war in Ukraine and imposition of sanctions on Russia will push up inflation significantly in the coming months. This will be compounded by restrictions on international trade and goods shortages,”

“Since 4 March, the rouble has continued to fall and reports of disruption to Russian exports and imports have become more widespread, so this is likely to be just the start of the inflation pressure feeding through.”

Russia "heads for one of biggest inflation shocks in decades"

The jump in Russia’s inflation rate is a clear sign of the damage being caused to its economy by the war in Ukraine.

Here’s Bloomberg’s take:

Russia is headed for one of its biggest inflation spikes this century after waves of sanctions over the invasion of Ukraine touched off the collapse of the ruble and disrupted trade.

In the first full week since the military offensive began late in February, prices for new domestic cars soared over 17% and the cost of television sets jumped 15%. Some medicines and vegetables became 5% to 7% more expensive in the seven days ending March 4.

Overall, inflation in the period reached 2.2%, according to a report by the Federal Statistics Service on Wednesday, the sharpest weekly increase since it started tracking the data in 2008 and more than double the previous record. On an annual basis, price growth was 10.4% as of March 4, according to the Economy Ministry.

Russian inflation rate soars

Inflation in Russia has accelerated to its highest level in seven years, as the slump in the rouble drove up the cost of living.

Annual inflation in Russia accelerated to 9.15% in February from 8.73% in January, its highest in seven years, the latest official statistics show.

The cost of living squeeze accelerated after the Ukraine war began. In the week to March 4th, weekly inflation rose to 2.22% from 0.45% in the preceding week, as the collapse in the currency pushed up costs of imports.

That pushed Russia’s annual consumer inflation to 10.42% as of March 4th, the economy ministry reports.

Reuters has more details:

According to the Rosstat data released on Wednesday, prices on nearly everything from bread to gasoline have spiked, with cost of sugar and cereals such as buckwheat - top products that Russians stockpile - showing some of the biggest increases of 20.6% and 18%, respectively.

Yet the biggest cost rise was in construction materials such as wallpaper and bathroom tiles, with prices spiking by 22.5%, indicating an increased demand to finish renovation projects amid booming costs for imported goods as the rouble was falling.

In the US, job vacancies remained high in January as firms continued to struggle to hire workers.

There were 11.3 million job openings at US firms in January, the latest JOLTS survey showed, ahead of forecast of 10.9m.

It’s a slight drop on December’s upwardly revised 11.45m vacancies, but suggests there were still labor shortages at the start of this year, as the omicron variant hit the economy.

Pamplona to cut ties with LetterOne

Investment manager Pamplona Capital Management is cutting its ties with LetterOne Holdings, the $22bn investment group whose largest shareholders were sanctioned by the European Union following the invasion of Ukraine.

LetterOne is one of Pamplona’s limited partners, but Pamplona has decided to redeem those interests after concluding that the links were “increasingly challenging”. It will return the money invested in its funds by LetterOne.

LetterOne was founded by Russian billionaire oligarch Mikhail Fridman and partners, with proceeds from the sale of oil group TNK-BP.

Fridman and fellow oligarch Petr Aven, LetterOne’s two biggest shareholders, were sanctioned by the EU, and stepped down from the group last week after their shares were frozen.

Pamplona says that once the LetterOne redemption has been carried out, it will have no direct or indirect exposure to any Russian capital.

While Pamplona has received clear guidance that LetterOne is not a sanctioned entity, the ongoing crisis in Ukraine makes such relationships increasingly challenging for our portfolio companies, their management teams, customers, employees, and counterparties throughout Europe and the rest of the world.

Any such redemption will be conducted in an orderly manner and in accordance with every appropriate regulatory and counterparty consent.

On Monday, three more Russian billionares resigned from LetterOne’s board, with the company also pledging a $150m donation to “support the urgent work under way to help those affected by the war in Ukraine”.

Updated

Wall Street opens higher as oil drops

The New York stock markets has opened higher, following Europe’s lead, as stocks recover some of their recent losses.

The Dow Jones industrial average of 30 large US companies is up 2%, or 649 points, at 33,281.

The broader S&P 500 index has gained 2.2%, with travel companies, financial stocks, tech companies and consumer goods and service providers rallying. On Monday night, the Wall Street benchmark had sunk to its lowest closing level since June 2021, as the Ukraine crisis continued to rock markets.

Today, there’s relief that oil prices have extended their earlier losses, with US crude down 4.6% at $118 per barrel, and Brent crude 5% lower at $121.30 per barrel.

European stock markets are holding their gains too. The blue-chip FTSE 100 still up over 2%, even as oil stocks and miners decline as commodity prices ease.

Robin Brooks, chief economist at the Institute of International Finance, forecasts that Russia’s economy will shrink by a massive 15% this year.

That chart shows how financial conditions in Russia have tightened dramatically since the Ukraine war began, with the rouble tumbling to record lows and the central bank more than doubling interest rates to 20% last week.

Global financial conditions have also hit their tightest levels since early 2016, Goldman Sachs data showed this week, after Russia’s invasion of Ukraine sparked market turmoil.

Financial conditions reflect the availability of funding in an economy, and are a guide to future growth as they affect how companies and households spend, save and invest.

Irish dairy and beef farmers urged to grow crops amid Ukraine shortage fears

Irish dairy and beef farmers are being urged to start growing crops as agriculture ministers from G7 countries including Britain’s George Eustice meet on Friday to discuss grain shortages and food price volatility amid the war in Ukraine.

There are rising fears that consumers will face price hikes on staples such as bread in addition to rises in fuel, with grain supplies disrupted by the conflict.

Ukraine, once known as the breadbasket of Europe, said on Wednesday it was banning exports of rye, barley, buckwheat, millet, sugar, salt and meat for the rest of the year.

Together with Russia it supplies 30% of global wheat and barley fuelling fears of shortages not seen since the second world war when consumers in Britain were encouraged to plant vegetables in gardens, yards and on rooftops.

Government data shows Ukraine supplies 20% of the UK’s cereals. Vikki Campbell, a market specialist at the Agriculture and Horticulture Development Board (AHDB), said the price of wheat futures – grain to be bought on 22 May – had gone up on six consecutive days.

On 18 February, days before war, wheat was trading in London at £220 a tonne, but had surged to £289.50 when the market closed on Tuesday.

More details here:

Sky Vegas fined £1.2m for sending free casino ‘spins’ to recovering addicts

Sky Vegas has been fined £1.2m for sending free casino “spins” to recovering addicts during the industry’s annual Safer Gambling Week.

The fine comes at a sensitive time for the British gambling industry, which has been at pains to show it has improved its attitude to social responsibility.

The government is in the middle of a review of gambling laws, with proposals to be published in a white paper expected within weeks. Yet major brands have been hit with a series of penalties for failing to protect vulnerable people in recent weeks.

888 Casino, which is in the process of buying William Hill’s UK assets, was fined £9.4m last week for multiple failings that led to customers racking up huge losses during the depths of the Covid pandemic. BetVictor was fined £2m in February for failures in fairness, money-laundering controls and social responsibility.

The new fine for Sky Vegas, which is owned by the global gambling firm Flutter, comes after it sent a promotional offer of “Bet £5 get 100 free spins” to 41,395 customers who had voluntarily self-excluded from gambling in an effort to stop.

A further 249,159 customers who had unsubscribed from the operator’s marketing emails also received the promotion.

“Here at Sky Vegas, we love the unexpected,” one marketing email read. “That’s right. Simply opt in, spend £5 and claim your 100 free spins. The best part? Whatever you win is yours to keep – that’s the fun in fair!”

The promotional message featured graphics of slot machines and the slogan: “Entertainment like no other”.

The incident, revealed by the Guardian in November last year, led addicts to warn that receiving such messages could have triggered a relapse.

Here’s the full story:

In the UK, Gatwick airport is expecting 3 million passengers a month this summer as the easing of travel restrictions and the return of takeoff and landing slot rules help the airport recover from its pandemic slump.

The airport reported narrower losses of just over £1m a day in 2021, down £95m on 2020 to £371m, despite passenger numbers falling further to 6.3 million last year.

Gatwick is expecting more than 30 million passengers in 2022, operating at 85% capacity in the summer, aided by the return of slot rules that ensure airlines use their alloted takeoff and landing slots at least 70% of the time.

The south terminal, mothballed to save money, will reopen at the end of March, when British Airways will also return to short-haul flying from the airport.

Gatwick’s biggest airline customer, easyJet, is planning to expand to record levels with 120 routes this summer, partly using slots leased from BA.

The airport said the decision to restore slot regulations, paused in 2020, would “restore discipline” and be more efficient and economically beneficial for the region but denied it would lead to “ghost flights”.

The chief executive, Stewart Wingate, said load factors on flights were already high before the new rules come into effect, adding:

“My biggest worry has been having a ghost terminal.”

He said the end of travel restrictions had increased demand, and businesses at the airport had been recruiting for more than 2,000 new posts over recent months.

Wingate said the airport was “very alert” to the risks from the Russian invasion of Ukraine but said at present:

“in terms of our business, presuming that the conflict doesn’t escalate, there is a very small direct exposure. On oil prices, the majority of large airlines are well hedged.”

The surge in natural gas prices, which intensified after the Ukraine war began, has forced fertiliser giant Yara to temporarily cut output at two European plants.

Norway’s Yara, one of the world’s largest fertiliser makers, is curtailing its ammonia and urea output at its plants in Ferrara, in Italy, and Le Havre, in France.

It says the move is due to Europe’s record gas prices, adding:

Including optimisation and maintenance at other production facilities, Yara’s European ammonia and urea production is expected to be operating at approximately 45% of capacity by the end of this week.

Yara will continue to monitor the situation and to the extent possible use its global production system to keep supplying customers and secure continuity in food supply chains, but curtailing production where necessary due to challenging market conditions.

Farmers have warned that fertiliser prices have risen sharply, pushing up costs, and possibly leading to lower crop yields this year if farms buy less.

UK household financial confidence lowest in a decade

In the UK, the cost of living squeeze has pushed household financial confidence to its lowest in at least 10 years.

A poll of consumer confidence from YouGov and economic consultancy CEBR found a sharp drop in household finances over the last month, and the outlook for the next year.

Both measures are at their lowest mark since the index began a decade ago.

Consumer confidence also fell, “in the face of rising energy bills and concerns about the impact of the Ukraine conflict on supplies”.

Here’s the details:

  • Consumer confidence dips by -2.4 points in February 2022
  • Household finance measures for the previous month (-9.2) and the year ahead (-19.3) see the worst scores in the near-ten-year history of the index
  • House value metrics for the past 30 days (+3.7) and the next 12 months (+0.8) climb upwards for the fourth month in a row

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, says:

‘’With the sanction screws turning ever tighter, and access to the depths of its war chest out of reach, Russia’s financial system looks in even greater peril.

The Fitch ratings agency has warned that the country is close to defaulting on its debts and is expected to miss a raft of bond payments. Russia has now retreated further into junk status, downgraded from B to C, as trade and financial restrictions bite.

The country’s deteriorating financial situation comes as more big consumer names take a short-term hit by suspending business in Russia to protect their long-term reputations, with consumers calling for boycotts otherwise, she adds.

Ukraine’s government has banned the export of wheat, oats and other staples that are crucial for global food supplies as authorities try to ensure they can feed people during Russia’s intensifying war, Associated Press reports.

New rules on agricultural exports introduced this week also prohibit the export of millet, buckwheat, sugar, live cattle, and meat and other “byproducts” from cattle, according to a government announcement.

The export ban is needed to prevent a “humanitarian crisis in Ukraine,” stabilize the market and “meet the needs of the population in critical food products,” Roman Leshchenko, Ukraine’s minister of agrarian and food policy, said in a statement posted on the government website and his Facebook page.

It’s the latest sign that the Russia’s invasion of Ukraine threatens the food supply and livelihoods of people in Europe, Africa and Asia who rely on the farmlands of the Black Sea region — known as the “breadbasket of the world.”

Russia and Ukraine together supply nearly a third of the world’s wheat and barley exports, which have soared in price since the invasion.

The products they send are made into bread, noodles and animal feed around the world, and any shortages could create food insecurity in places like Egypt and Lebanon.

The export ban will likely reduce global food supplies just when prices are at their highest level since 2011.

Updated

The rouble weakened in Moscow and offshore this morning, hitting new record lows against the dollar and euro in Moscow, Reuters reports.

The rouble was more than 10% weaker than its Friday close at 117.2 to the dollar on the Moscow Exchange, as trading resumed after a bank holiday.

Gas prices have eased back from their record levels earlier this week, but remain exceptionally high.

The UK wholesale gas contract for delivery next month has dropped 17% this morning, to 421p per therm.

On Monday gas briefly hit a record 800p/therm on fears of supply disruption to Europe from Russia, but has dropped back since.

However, it’s still almost 10 times higher than a year ago, following the energy crunch which is hitting the economy.

The UK wholesale gas price
UK wholesale gas prices over the last year Photograph: Refinitiv

Oil has also dipped a little. Brent crude is down 2% at $125 per barrel, away from the 14-year high of $139/barrel seen at the start of the week.

Brent was under $100/barrel before the Ukraine invasion last month.

A private plane with suspected links to Russia has been impounded at Farnborough airport in Hampshire just hours before it was due to fly to Dubai, our political correspondent Aubrey Allegretti writes.

The aircraft was detained on the orders of the transport secretary, Grant Shapps, late on Tuesday and investigators are looking into its connection with a billionaire oil tycoon, Eugene Shvidler (as flagged here), a friend of Roman Abramovich.

A UK government source said Shvidler was “free to continue his journey by other means” after the plane was impounded.

They said the plane would be able to leave Farnborough only if no link with Russia was established, and the process was likely to take longer than a day.

Updated

Full story: KFC and Pizza Hut owner and Heineken pause business in Russia

The owner of KFC and Pizza Hut, along with Mothercare, Heineken, Universal Music Group and Imperial Brands, have all become the latest companies to pause business in Russia following its invasion of Ukraine.

Kentucky-based Yum! Brands is suspending 70 KFC company-owned restaurants in Russia and finalising an agreement to suspend all 50 Pizza Hut outlets in partnership with its master franchisee.

Yum! has 1,000 KFC restaurants in Russia, most of which are run by franchisees. The company had already previously suspended all investment and restaurant development in Russia.

Pizza Hut opened its first Russian outlet at the start of the 1990s and the former leader of the Soviet Union Mikhail Gorbachev was featured in one of its television adverts in 1998.

Heineken is stopping the production and sale of its own-brand beer in Russia, after previously halting all new investments and exports to the country.

The Dutch brewer is taking immediate steps to ringfence its Russian operations from its wider business.

Also on Wednesday, Universal Music Group said it was “suspending all operations in Russia” and closing its offices in the country “effective immediately”.

Here’s the full story:

Tobacco group Imperial Brands has suspended all operations in Russia, including production at its factory in Volgograd and sales and marketing activity.

It says:

This decision comes amid a highly challenging environment in Russia as a result of international sanctions and consequential severe disruption. We will be supporting our Russian employees, who continue to be paid while operations are paused.

The maker of Winston cigarettes, Gauloises and Backwoods cigars adds it had already suspended operations in Ukraine to “prioritise the safety and wellbeing” of its 600 employees there.

European stock markets are rallying this morning, with the FTSE 100 index of blue-chip shares jumping over 2%.

Travel stocks and banks are among the risers, having been badly hit by the slump in financial markets since the war in Ukraine began. Airline group IAG, engineering group Melrose, and Lloyds Banking Group have all gained around 7%.

Gold and silver producer Polymetal has surged 42%, from a record low yesteday, after reporting its operations in Russia and Kazakhstan continue undisrupted, although sales of bullion in Russia have been impacted by sanctions imposed by the US, EU and UK.

Having gained 150 points to 7,115 points this morning, the FTSE 100 is still around 5% below its levels in mid-February before the invasion.

The FTSE 100
The FTSE 100 Photograph: Refinitiv

European stocks are also stronger, with Germany’s DAX and France’s CAC share indexes up almost 5% each.

“Markets across Europe saw strong gains on Wednesday following decisions by the UK, US and EU to ban or curb Russian oil and gas imports, thereby putting further financial pressure on Russia,” says Russ Mould, investment director at AJ Bell:

“After a strong run for commodity producers on the market, names like Rio Tinto and Glencore slipped back on the FTSE 100, with investors instead fishing for bargains among more beaten-up consumer-facing stocks including International Consolidated Airlines and Primark Associated British Foods.

“In Germany, the DAX jumped 3.8%, led by another consumer-facing stock, Adidas, as well as Deutsche Post. Adidas’ shares were helped by expectations of a sales recovery in China and guidance for improved operating margins, but it set the tone for many companies to come by quantifying the expected hit from halting business in Russia, which in its case is up to €250 million.

Mothercare has joined the growing list of companies turning their backs on Russia following the war in Ukraine.

The parenting company has decided to suspend all business in Russia, including shipments of products, and its local partner will immediately pause operations in some 120 stores and online.

The move will hit the group - as Russia contributes around 20-25% of its worldwide retail sales. Shares in Mothercare have fallen 25% this morning.

Russian-born billionaire Eugene Shvidler at home in ‘Chateau Thenac’, his vineyard and country retreat, back in 2009
Russian-born billionaire Eugene Shvidler at home in ‘Chateau Thenac’, his vineyard and country retreat, back in 2009 Photograph: Andy Hall/The Observer

Eugene Shvidler, the billionaire linked to the impounded jet in Farnborough, made his fortune in oil during the privatisation of Russian industry in the 1990s.

Shvidler worked closely with Roman Abramovich, and was chief executive of oil company Sibneft. Sibneft was privatised through the controversial loans-for-shares auction in which Russian assets were sold off below their true value.

Shvidler chairs Millhouse Capital, which manages the assets of Ambramovich and his partners, and which sold its 73% stake in Sibneft to Gazprom for $13bn back in 2005.

Shvidler has been called Abramovich’s best friend; back in 2006, Abramovich gave him a superyacht, Le Grand Bleu -- a 113m vessel so immense it comes with two smaller yachts (a 22 meter sailboat and a 21 meter powerboat), and a helipad.

Back in 2009, the Observer ran a fascinating interview with Eugene Shvidler, in which he explained that Abramovich gave him a flock of Highland sheep for his 45th birthday.

“A friend of ours owns a place in Scotland, and when I went there I liked the sheep,” Shvidler says by way of explanation. What did he like about them particularly? “They had a special shaped head.”

The sheep were then shipped to Shvidler’s 16th-century manor house in Bergerac, Chateau Thénac, the 200-hectare French vineyard.

Russian-born billionaire Eugene Shvidler at home in ‘Chateau Thenac’, his vineyard and country retreat. Bergerac, France. 4/09/09
Eugene among the vines at ‘Chateau Thenac’. Photograph: Andy Hall/The Observer

Shvidler, who holds a masters degree in applied mathematics, an MBA in finance and MS in international tax, came across as “surprisingly unshowy” for a billionaire, wrote Elizabeth Day:

Although he has flown in by private jet from his family home in Cobham, Surrey, and we are shortly to enjoy a mouth-watering three-course meal knocked up by his personal chef, these outward manifestations of his wealth are the most extravagant thing about him. He is short, a little bit plump and wears nondescript but impeccable clothes: carefully pressed trousers, a brown-black jumper and leather trainers laced up over tiny feet.

As we walk through the rows of leafy vines, each one bowed down with the weight of grapes ready to harvest, Shvidler looks towards the château’s mottled brick walls surrounded by lush green lawns and rose bushes. “Here it doesn’t matter who you know,” he says simply.

He abhors the sort of flashiness that is often reported in the media as being synonymous with an oligarch’s lifestyle. “Ninety-nine per cent of what is written is bullshit,” he says. Later one of his employees will tell me that an oft-repeated story about Abramovich spending £4,000 hiring a private jet to fly him sushi in Azerbaijan is untrue: Abramovich has been a vegetarian for years.

“Oligarch is just a nonsense word,” says Shvidler. “What does it mean? I don’t like it.” Yes, but does he actually have leather floors in his Belgravia mansion? He rolls his eyes. “We have leather, but it’s not me. It was the designer before we bought the house.”

Updated

Britain has impounded a private jet at Farnborough airport as it investigates whether it has breached a flight ban over the UK.

Transport Secretary Grant Shapps told BBC Breakfast that the UK’s new aviation sanctions would close gaps allowing people to get around the ban on Russian airlines and private jets.

“However there were potential loopholes and I also wanted to make the issue a criminal one, so last night I also signed a law which closes off some of those loopholes to do with trying to work out the ownership of some of these aircraft.

“There is one such aircraft on the ground at Farnborough that I have essentially impounded whilst we carry out further investigations, for the last few days.

It’s very important that we have the laws available to enable that to happen.”

The Daily Telegraph reports that the jet is a Bombardier Global Express linked to oligarch Eugene Shvidler, the billionaire oil businessman and close friend of Roman Abramovich, and that officials are investigating if the jet or Mr Shvidler falls within the definition under the sanction order.

The Telegraph says:

Sources said that establishing the true owner was complicated – and made more so by Mr Shvidler’s residency, as a dual US-Russian citizen.

The Department for Transport was alerted soon after its landing at Farnborough Airport on Friday morning. It filed a flight plan on Monday and was due to depart on Tuesday, according to government sources.

In the early hours of Tuesday morning, the Transport Secretary ordered its foreign carrier permit be revoked, meaning that the jet could no longer leave the UK carrying passengers. It would have meant that Mr Shvidler was unable to leave the UK on his jet and would have to find alternative means to depart.

Updated

UK announces new aviation sanctions against Russia

The UK government has unveiled new aviation sanctions against Russia this morning.

The new rules gives the power to detain any Russian aircraft in the UK, and includes any aircraft owned, operated or chartered by anyone connected with Russia or designated individuals or entities.

The current overflight and landing ban on Russian aircraft is also being strengthened, making it a criminal offence for any to fly or land in the United Kingdom.

The UK will also ban exports of aviation or space-related goods and technology to Russia, including technical assistance.

UK companies will also be banned from related providing insurance and re-insurance services. That means cover is withdrawn on existing policies and UK insurers and reinsurers will be unable to pay claims in respect of existing policies in these sectors, the Foreign Office says.

Foreign Secretary Liz Truss said the new measures will further tighten the growing economic pressure on Russia:

Banning Russian flagged planes from the UK and making it a criminal offence to fly them will inflict more economic pain on Russia and those close to the Kremlin.

Last night, transport secretary Grant Shapps tweeted the move would “suffocate [Vladimir] Putin’s cronies’ ability to continue living as normal while thousands of innocent people die”.

Introduction: ‍Fitch says Russia debt default imminent

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Russia is on the brink of defaulting on its debts, rating agency Fitch has warned, as the sanctions imposed since the Ukraine war batter its economy.

Fitch has downgraded Russia’s sovereign debt to its second lowest level, down six notches to C. That’s just one step above borrowers who have defaulted.

The agency warns:

The ‘C’ rating reflects Fitch’s view that a sovereign default is imminent.

Fitch said that developments since it last downgraded Russia on March 2nd had further undermined the country’s willingness to service government debt.

It points to President Vladimir Putin’s decree last week that Russian creditors can use roubles to pay some foreign currency debts, and the country’s central bank’s restriction of some rouble-denominated debt coupon transfers.

The intensifying sanctions could also lead Moscow to default on its obligations, Fitch says:

The further ratcheting up of sanctions, and proposals that could limit trade in energy, increase the probability of a policy response by Russia that includes at least selective non-payment of its sovereign debt obligations.

The statement comes after the US and UK said they will ban Russian oil, as the economic response to the invasion of Ukraine continued to ratchet up.

Russia is due to make its next debt repayment on March 16 -- though it would have a 30-day grace period to meet the coupon payments.

Western sanctions, including a ban on Russia’s central bank from accessing foreign currency reserves, have preventing Putin from accessing much of the $630bn war chest built up in foreign currencies before the invasion.

Yesterday, a flurry of major Western countries suspended business in Russia, with Starbucks, Coca-Cola, Pepsi and McDonald’s joining the pullout following the Ukraine war.

Shell announced plans to withdraw from Russian oil and gas and Unilever has said it will stop importing and exporting its products with Russia:

European markets are set to open higher, with the FTSE 100 on track to jump more than 1% at the open.

The agenda

  • 3pm GMT: US JOLTs job openings total in January
  • 3.30pm GMT: IEA weekly US oil inventory figures

Updated

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