25 February 2022
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US, UK, Europe impose additional sanctions on Russia

By Daniel Richards

  • Russian forces are reportedly within reach of Ukraine’s capital Kyiv. Five Russian financial institutions covering around 80% of Russian banking assets have been sanctioned by the US, although USD clearing will still be allowed for energy payments. The US will also release oil from its strategic petroleum reserve to help cushion the impact of higher prices on American consumers. Exports of semiconducters and other technology related to military, biotech and aerospace industries will also be banned, and Russian state-owned companies won’t be allowed to raise capital in the US or Europe. The UK also announced further sanctions against Russian individuals, banks and the national air carrier, as well as those of Belarus. While severe, the sanctions stopped short of completely barring Russia from the Swift, the international messaging system for payments, or cutting of Russian energy exports.
  • US Q4 GDP came in at 7.0% in the second estimate, up from the initial estimate of 6.9%. however, personal consumption growth was revised lower to 3.1% from 3.3% previously, while private investment was revised slightly higher to 33.5%. Rising inventories were the key driver of US economic growth last quarter.  Core PCE, the Fed’s preferred measure of inflation, rose 5.0% q/q in Q4 2021 up from the first estimate of 4.9%.
  • In other US data, initial jobless claims declined to 232k in the week to 19 Feb indicating that the impact of the omicron variant on the labour market and economy is easing. Continuing claims for the prior week also fell by more than expected. New home sales came in slightly lower than forecast in January at 801k, down -4.5% m/m.
  • Tokyo CPI accelerated to 1.0% y/y in February from 0.5% in January and above what the market was expecting. Excluding fresh food, inflation was just 0.5% y/y, and core inflation (ex food and energy) declined -0.6% y/y.    

Today’s Economic Data and Events

17:30 US personal income (Jan) forecast -0.3% prev 0.3%

17:30 US personal spending (Jan) forecast 1.6% prev -0.6%

17:30 US durable goods orders (Jan) forecast 1.0% prev -0.7%

19:00 US University of Michigan Sentiment (Feb) forecast 61.7 prev 61.7

Fixed Income

  • After an initial surge as investors flocked to safety on the news of Russia’s invasion of Ukraine, US Treasuries faded their gains from around midway through the session. US sanctions targeted Russia’s financial system, including several of its largest banks, but fell short of cutting the country off from the Swift financial messaging system or from targeting its energy exports. After more than a 10bps drop with yields falling to as low as 1.45%, the 2yr yield settled at 1.5797%, down around 2bps on the day. Yields on the 10yr UST showed a similar move, falling to as low as 1.85% at one point before moving higher to close out at 1.9633%, down almost 3bps.
  • Fed governor Christopher Waller said that the upcoming data may warrant a 50bps hike at the March FOMC. Like St Louis Fed president James Bullard, Waller supports 100bps of hikes by the “middle of this year.”
  • European bonds were well supported in the early risk off moves with yields on both long-dated gilts and bunds falling. The 10yr gilt yields closed at 1.444%, down 3bps, while the 10yr bund fell 6bps to 0.1666%. Emerging markets bonds generally sold off with yields up by 20bps in South African to 9.836%. Yields on Indian bonds jumped higher at the start of the trading day and then held relatively steady at around 6.76%. Russian bonds collapsed with yields shooting up more than 430bps to 15.23%.


  • Investors stampeded toward the dollar on the news of Russia’s invasion of Ukraine, even as Treasury yields initially sank. The broad DXY index of the dollar rose nearly 1% on the day with some of its gains faded as the US sanctions carved out room for Russia to continue processing international payments. EURUSD fell 1% on the day to 1.1192 and is making some tentative moves higher in early trade today while GBPUSD sank more than 1.2% to 1.338. Despite the enormous risk stemming from the conflict in Eastern Europe neither JPY nor CHF held on to risk-off gains.
  • In the commodity currency space USDCAD was the relative outperformer, rising by only 0.6% to 1.2816 even as oil prices crossed the USD 100/b threshold. Both AUD and NZD fell heavily, down 0.98% for AUDUSD to 0.7163 while NZDUSD fell almost 1.2% to 0.6693.


  • European equity markets came under concerted selling pressure yesterday as the invasion of Ukraine gathered pace. The CAC lost -3.8%, the FTSE 100 -3.9% and the DAX -4.0%.
  • US equity markets started the session on the back foot but recovered later in the day as clarity over the scope and scale of sanctions against Russia emerged. By the close, all three major benchmark indices were in positive territory, with the Dow Jones up 0.3%, the S&P 500 1.5% and the NASDAQ 3.4%.
  • Locally, equities remained under pressure as both the Tadawul and the DFM dropped -1.8% while the ADX lost -0.3%.


  • Oil prices surged on the news of Russia’s invasion and fear that global energy markets could end up even tighter. Brent futures pushed above USD 100/b for the first time since 2014, moving up to nearly USD 106/b before news that US sanctions were not targeting Russian energy exports helped to bring prices down later in the day. Brent settled up 2.3% at USD 99.08/b. WTI also crossed over above USD 100/b before likewise fading the gains and ending the day at USD 92.81/b, a gain of around 0.8%.
  • As part of the US response, the country will release more barrels from its strategic reserve, a policy it already started last year when oil prices were much lower than they are at present.
  • In metals markets, gold prices closed lower on the day after an initial pop higher as it became clear that the US and EU were not imposing the most onerous restrictions on Russia. The rest of the precious metals complex moved lower as well. Industrial metals moved higher with aluminum adding 3% as the conflict could risk threatening supplies from Russia, one of the world’s largest producers.
  • Wheat prices spiked up almost 6% as anxiety over the supply from both Russia and Ukraine weighs on markets. Both countries are major exporters of wheat and agricultural commodities.

Click here for charts & tables




Written By

Daniel Richards Senior Economist

Edward Bell Head of Market Economics

Khatija Haque Head of Research & Chief Economist

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