Economy

(Reuters) – Western allies’ sanctions against Russia have started to blow back in the form of large potential losses for their own banks, companies and investors, often in unexpected ways. In the past, such fires have been precursors to financial crises.But some market participants say they aren’t seeing panic in the market, at least not yet.”We haven’t had any of those ‘holy shit’ phone calls,” said David Schamis, co-founder of financial services-focused private equity firm Atlas (NYSE:ATCO) Merchant Capital, while heading out of town for his daughter’s hockey tournament over the weekend.”There is so much more capital in the system. Russia is not that big. Risk management is better,” Schamis said, comparing the situation now to the financial crisis in 2008 when he had a front-row seat as someone with capital to invest.Indeed, banks have fat buffers this time around. In a sign of how much extra cash is sitting around with nowhere to go, the Federal Reserve said on Friday financial institutions placed more than $1.4 trillion overnight with it for almost no returns. It shows there is enough capital in the financial system to absorb losses from the Ukrainian invasion. Still, the sinkhole of potential losses is rapidly growing.From Societe Generale (OTC:SCGLY) SA and BP (NYSE:BP) Plc in Europe to Citigroup Inc (NYSE:C) in the United States, Western companies have tallied up billions of dollars in exposure to Russia, money that they could lose. By one major U.S. bank’s estimate, the West’s exposure through its companies as well as its dealings with the Russian central bank could be around $400 billion.The shock is being felt in unexpected places. In Germany, the debt office has had to increase the size of a bond to ease conditions in euro zone overnight lending markets, a crucial source of credit for banks and other financial institutions. Bunds are used as collateral in the market but there has been a shortage. The Germans have said they suspect some of the bonds are held by sanctioned entities that cannot trade.In Russia, internet companies Ozon Holdings Plc and Yandex (NASDAQ:YNDX) NV could face nearly $2 billion in unexpected bills after trading in their U.S. listed shares was suspended after the sanctions. That could trigger a clause in their debt agreements that makes some of their bonds redeemable. Yandex said it doesn’t have the money to pay investors.The disparate nature and the geographical spread of these fires are some of the hallmarks of financial contagion, the idea that losses can quickly barrel through a deeply interconnected system in ways that no one can fully predict. At some point as losses spread, market participants panic and withdraw, freezing credit and precipitating a broader financial crisis.Former Commodity Futures Trading Commission Chairman Timothy Massad was deeply involved as a Treasury official in the U.S. government’s handling of the 2008 financial crisis. Echoing Schamis, he believes that the system is well able to absorb the shock and he hasn’t noticed anything that raises serious concerns about financial stability.Even so, the situation is rapidly evolving. “I don’t think this is a stable situation,” said Massad. “What concerns me the most is how long this goes on and whether something happens in the war that triggers a much bigger shock or triggers panic.”The attack Friday on Ukraine’s nuclear plant wastroubling, he noted. Some signs of stress have started to appear in markets, with investors shedding riskier assets. Banks are getting nervous about lending to each other and hoarding dollars, which are getting more expensive for foreigners to procure. But these indicators are well below the peaks seen during full-blown crises and the market’s plumbing is holding up.Russian assets are in purgatory. Moscow abruptly ordered brokers to reject ‘sell’ orders by foreigners for Russian securities on Feb. 28. That meant any orders to sell rouble-denominated Russian government bonds that had not settled by then were stuck. By one estimate, hundreds of millions of dollars’ worth of proceeds might be frozen, but even then market participants say the hit to portfolios is not large enough.  For now, the word on the Street is more of confusion than panic. People are working through what the raft of sanctions against Russian banks, assets and individuals means for their dealings and holdings, market participants say. “The danger comes from the fact that you have long intermediation chains that make it difficult to know what exactly the exposure and the risks are,” Massad says. More

Investing.com — Oil and natural gas prices surge to new highs as the U.S. floats a full ban on purchases of Russian energy. The euro slumps in the face of a stagflationary shock and the threat of global instability driven by high food prices increases as wheat prices hit new all-time highs. Stocks are set for a rough ride. Here’s what you need to know in financial markets on Monday, 7th March.1. Oil surges as Blinken moots Russian energy purchase banGlobal stock markets tumbled as crude oil prices leaped again to their highest since 2008, after U.S. Secretary of State Anthony Blinken said that the U.S. is actively looking at closing the sanctions loophole that allows Western buyers to keep buying Russian oil and gas.U.S. crude prices rose as much as 10% to hit $130.33 a barrel, while Brent futures rose as high as $130.89 a barrel, before both retraced to be up just over 6% on the day by 6 AM ET (1100 GMT). Prices of other commodities where Russia is a key exporter, such as Nickel, Palladium and wheat (see below), also hit new highs.Blinken’s comments represented a shift in U.S. policy, after initial hesitation on the part of President Joe Biden, who is reluctant to push domestic gasoline prices higher. Pump prices are now over $4 a gallon in many states, while wholesale futures topped $3.70 a gallon in overnight trading.A tightening of official sanctions would reinforce the ‘self-sanctioning’ already evident in oil markets, which saw one Russian export tender after another find no buyers last week. Shell (LON:RDSa), which broke ranks to buy a cargo of Russian crude at $28/barrel below benchmark prices on Friday, was pressured by public outrage into saying on Sunday it would divert all profits from the trade to a charity helping victims of the war.2. Euro slumps on growth, inflation fears; Swiss National Bank steps inThe economic shock of the war, and the latest rise in energy prices, is glaringly asymmetric: it will hit Europe much harder than the U.S., because Europe relies so much more on Russian energy.  Germany has resisted pressure for a full ban on Russian energy imports, but other voices in the EU, notably in former Soviet bloc, have said they think the security concerns trump the economic pain. Benchmark European Natural Gas Futures exploded to hit 345 euros ($374) a megawatt-hour before retracing after a German government spokesman said his country wouldn’t be part of such sanctions.The euro fell to as low as $1.0807, extending its worst 3-day streak since 2020. It’s now lost nearly 4% against the dollar in the last week, amid growing belief that the European Central Bank will put on ice any plans it had for tightening monetary policy, despite the high current level of inflation.Meanwhile, the Swiss National Bank said it was ready to intervene to stop the Swiss franc – one of the world’s favorite funding currencies – appreciating further. The message was enough to make the franc stay below parity with the euro.The dollar index, which tracks the greenback against a basket of developed market currencies, hit a fresh 22-month high. Other havens were also in demand: Gold Futures topped $2,000 an ounce. 3. Stocks set to open sharply lower; Cohen adds to his turnaround portfolioU.S. stocks are set to open sharply lower as the prospect of higher oil prices stokes fears of an inflationary shock and a growth slowdown at the same time. That’s despite a monthly labor market report on Friday that showed the U.S. economy in rude health and fast closing in on replacing all the jobs that were lost in the first year of the pandemic.By 6:15 AM ET (1115 GMT), Dow Jones futures were down 528 points, or 1.6%, while S&P 500 futures were down 1.6% and Nasdaq 100 futures were down 1.7%.With earnings season having run its course, the focus is shifting to ad hoc news, notably in merger and acquisition activity. Stocks likely to be in focus later include North Dakotan shale drillers Oasis and Whiting, which The Wall Street Journal reported to be in merger talks on Sunday.  Also in focus will be Bed Bath & Beyond (NASDAQ:BBBY) after Chewy (NYSE:CHWY) founder Ryan Cohen amassed a stake in the troubled retailer (apparently turning GameStop (NYSE:GME) around isn’t enough of a challenge).4. Russian economy creaks as debt defaults loom In Russia, meanwhile, the economic situation continues to deteriorate sharply. The dollar gained another 12.8% against the ruble in Moscow on Monday, and the Russian currency has now lost half its value since the invasion started.Over the weekend, some 4,300 people were arrested at anti-war rallies that followed the near-total ban imposed on independent media on Friday. American Express, Visa (NYSE:V) and Mastercard (NYSE:MA) announced further restrictions on their services (although they will continue to work for payments by Russians within Russia), while Netflix (NASDAQ:NFLX) and accounting giants EY, KPMG and PwC all suspended their services in the country.  The first of what will be many defaults on international debt will probably be confirmed Monday, as oil company Rosneft and gas giant Gazprom (MCX:GAZP) appear likely to make use of a new Russian central bank dispensation allowing them to service their foreign currency debt with ruble payments. That will breach the covenants in their respective bond prospectuses unless holders agree to the move, which seems unlikely given the ruble’s sharp depreciation.Gazprom in particular is one of the biggest corporate debt issuers in dollars and euros, and any formal default would send shockwaves through emerging debt markets.  5. World grain crisis looms; Wheat hits new ATHWheat Futures were again suspended, limit up at a new all-time high of $1,294.12, on the CME as fighting in Ukraine continued to disrupt supply from two countries that supply nearly 30% of the world’s most important grain.Analysts are increasingly concerned about the impact of the war on global food prices, given the key role played by Russia and Ukraine in other agricultural commodities such as corn and sunflower oil and fertilizer. The fighting is already putting an end to sowing in most of parts of Ukraine, locking in reduced harvests this year from the affected regions. Lower fertilizer availability will depress yields further.High food prices were one of the factors that contributed most to the Arab Spring in 2010/2011, and are already causing concern in Egypt, a country of 105 million people that imports over 80% of its wheat from Russia and Ukraine and which subsidizes bread prices extravagantly. More

The price of oil rose to its highest level since 2008 after US secretary of state Antony Blinken said Washington was in “very active discussions” with its European partners about a ban on oil imports from Russia.The restrictions would have potentially serious ramifications for the global economy and would mark an about-turn by the White House, which had previously rejected bipartisan calls to ban Russian oil imports to the US, saying an embargo would limit global supply and raise prices for consumers.Analysts at Bank of America warned that if most of Russia’s oil exports were cut off, there could be a 5mn barrel a day shortfall or more, leading oil prices to double from $100 to $200 a barrel. JPMorgan analysts said oil could soar to $185 a barrel this year.International benchmark Brent hit $139.13 a barrel in European trading today, almost 20 per cent higher than its settlement price on Friday. West Texas Intermediate, the US benchmark, climbed $9.80, or 8.5 per cent, to $125.48. European natural gas prices soared to a record high.Meanwhile, a high-level US delegation met top government officials in Venezuela over the weekend, according to a source familiar with the discussions, as the world seeks alternative suppliers to replace Russian oil if western sanctions on Moscow are tightened. And President Joe Biden is reportedly considering a trip to Saudi Arabia in the spring to urge the kingdom to pump more oil.The turmoil in energy markets came as Russia temporarily suspended its attacks on Kharkiv, Kyiv, Sumy and Mariupol to create humanitarian corridors out of the cities as the UN said the number of refugees fleeing conflict zones in Ukraine now topped 1.5m.But it was unclear how many Ukrainian civilians would want to take up the Russian offer because most of the humanitarian corridors Moscow were proposing end up in Russia itself or in the neighbouring Russian ally of Belarus.Separately, the White House confirmed yesterday it was negotiating with the Polish government to supply Kyiv with American F-16 jets to replace Russian-made warplanes that Ukrainian pilots are trained to fly.More on Ukraine:Interview: Scott Sheffield, chief executive of the US’s biggest shale oil operator Pioneer Natural Resources, said the country would be unable to replace crude supplies from Russia this year, even as he backed calls for a global embargo on its energy exports.Market Insight: Derek Brower argues that oil prices may still climb higher even if the US shale industry increases production. Jonathan Guthrie writes that economic warfare cannot be fine-tuned to spare the energy sector.Military Briefing: Ukraine is holding out against the Russian advance but fears are growing over Moscow tactics. Our daily military briefing has more. Info wars: ByteDance-owned app TikTok has become a vital news source for young people following the war in Ukraine.Nuclear threat: Vladimir Putin last week sparked menacing echoes of the Cuban Missile Crisis. US correspondent Demetri Sevastopulo assesses the risks posed by the Russian president’s high-stakes nuclear posturing.Opinion: Putin’s plan is failing in ways he could not have imagined, writes Simon Schama. Rana Foroohar writes on how technology is quickening the pace of conflict.

Track troop movements on our regularly updated map of the conflict and follow our live blog for the latest developments.Five more stories in the news1. Visa, Mastercard and American Express suspend Russia operations The payment networks have said they will suspend operations following a request from Ukraine’s president. Separately, VTB Bank, Russia’s second-largest lender, is preparing to wind down its European operations. Meanwhile, PwC and KPMG have severed ties with their Russia and Belarus businesses as the west’s business boycott grows.3. China sets lowest growth target in 30 years Premier Li Keqiang announced China’s lowest annual growth target for three decades at the opening of the National People’s Congress in Beijing over the weekend. Li said China’s economy would grow 5.5 per cent this year, the first time since 1991 the annual target has been below 6 per cent. The national defence budget grew at the fastest pace for three years to Rmb1.45tn ($229bn).3. Senior Democrat warns against crypto crackdown Ron Wyden, the chair of the Senate Finance Committee, has warned his colleagues against cracking down too hard on the booming cryptocurrency industry, likening it to the infancy of the internet. “There is obviously a debate [about stricter regulation] but I want to be on the side of the innovator,” he told the FT.4. Spacs tap hedge funds in desperate hunt for cash Special purpose acquisition companies desperate to go public and stem redemptions are turning to investors including hedge fund Atalaya Capital Management and private equity group Apollo for so-called redemption capital.5. Pandemic redraws US airline route maps US airlines are redrawing the flight map of America as they cut routes that the pandemic rendered unviable and add services to cities that have prospered. Persistent weakness in business travel and the adoption of remote work are driving the changes. The day aheadUK pledges $100mn in Ukraine aid Boris Johnson will announce extra aid as the UK prime minister hosts Justin Trudeau and Mark Rutte, his Canadian and Dutch counterparts respectively, in Downing Street. It comes as Kyiv negotiators meet their Russian counterparts for a third round of talks and Antony Blinken visits Lithuania before travelling to the neighbouring Baltic states of Latvia and Estonia. International Atomic Energy Agency meeting The organisation’s board of governors convenes in Vienna to discuss, among other items, the nuclear safety implications of the crisis in Ukraine. Moscow is seeking written guarantees from Washington that US sanctions imposed on Iran do not impede its ability to trade with the country.George Floyd death trial The trial begins of three former Minneapolis police officers, charged with aiding and abetting unintentional second-degree murder and aiding and abetting second-degree manslaughter in relation to the death of Floyd in May 2020. Keep up with the important business, economic and political stories with the FT’s Week Ahead. Click to subscribe here. And don’t miss our FT News Briefing audio show, a short daily rundown of the top global stories.What else we’re readingBoomerang employees: returning with new skills and experience Keen to fill labour shortages, employers have tried recruitment parties, hiring bonuses, wage increases and perks. Now some are considering previous employees. Emma Jacobs spoke to Lien Ceulemans, who left Salesforce in 2018 for a new job at Google but has recently returned to the US cloud software group. The office is fine but the commute is still atrocious The offers of free food, coffee and even back massages are all welcome as we return to our desks after two years of homeworking, writes Pilita Clark. But, she says, they are up against a formidable rival: the commute.Why is the UK stock market so cheap? Returns from the British stock market have lagged behind international rivals since the 2016 Brexit vote. But there are more fundamental problems for what has been dubbed a “Jurassic Park” market. Our Lex team investigates in today’s Big Read.India’s uneven recovery Two years after the coronavirus pandemic plunged the country of 1.4bn into a recession, India is now the fastest-growing large economy in the world. But the bullish mood conceals a deep malaise. Will prime minister Narendra Modi pay a political price?Happy landings: how pilots tackle high winds Former pilot Mark Vanhoenacker uses the analogy of a river to illustrate the effect crosswinds can have on a plane’s flight and how the “crabbing” technique can help to land safely in high winds.“For a headwind, imagine that this river is flowing straight along the runway, and that you are facing upstream as you land; your effective speed over the riverbed, then, will be lower, by an amount equal to the speed of the current.”House & HomeAbout 150,000 people flock to the US desert city of Palm Springs every spring for a nostalgia fest of mid-century design. Helen Barrett attended the 11-day extravaganza for the Financial Times.

A festival week poolside cocktail party at the house © David A Lee More

NEW YORK (Reuters) – The U.S. Justice Department last week launched a task force aimed at choking off assets that Russian oligarchs own in the United States, part of Washington’s efforts to pressure Moscow to cease its invasion of Ukraine. Here’s how federal prosecutors could seize property belonging to allies of Russian President Vladimir Putin within the United States and use civil forfeiture laws to confiscate their assets permanently.WHAT IS NEEDED TO SEIZE PROPERTY? Law enforcement officials who believe an asset such as a home, a yacht, or an investment account was used to commit a crime or represents the proceeds of illegal activity may request a warrant to seize the property. A judge would grant the warrant if there is “probable cause” to believe the property is linked to a crime in the United States. Certain crimes committed overseas – including public corruption and drug trafficking – provide U.S. prosecutors with grounds to seek civil asset forfeiture.That would bar the owner from selling or transferring the property, said Stefan Casella, a former federal prosecutor focusing on money laundering and asset forfeiture. IS THAT THE END OF THE PROCESS? No. For property exceeding $500,000 in value, prosecutors are required to file a civil asset forfeiture complaint in court seeking to permanently confiscate an asset. The case would be brought by federal prosecutors in the jurisdiction in which the assets were located.”If the allegation were this money is derived from bribing Vladimir Putin, then you could commence a civil forfeiture action,” Casella said. Casella added that it was not enough to prove the owner of the property committed a crime: prosecutors must also show that the particular asset they are targeting was linked to the criminal activity. Frequently, assets are owned through anonymous companies and the property owner does not wish to appear in court, said Sarah Krissoff, a partner at law firm Day Pitney LLP and former federal prosecutor.”There are certainly circumstances where civil litigation is filed and the government is successful by default because the people on the other side of the aisle do not want to actually identify an interest in that property,” Krissoff said.HOW LONG DOES THE PROCESS TAKE?It can take years. For example, in July 2016, the U.S. Department of Justice (DOJ) filed civil forfeiture complaints to recoup more than $1 billion in assets linked to the looting of Malaysian sovereign wealth fund 1MDB. The DOJ reached a $700 million settlement with a Malaysian financier accused of being the mastermind of the scheme more than three years later. HOW DOES CIVIL ASSET FORFEITURE DIFFER FROM CRIMINAL PROSECUTION? Prosecutors may charge oligarchs criminally and seek asset forfeiture as part of a potential punishment, but Russian oligarchs are unlikely to set foot in the United States to face trial. Civil claims can take place against U.S. property even without the property owner present in the country.”A lot of these bad actors are not available to be prosecuted in the United States,” said Duncan Levin, managing partner at Tucker Levin PLLC and a former federal prosecutor. HAS CIVIL ASSET FORFEITURE BEEN USED TO SEIZE PROPERTY BEFORE? Yes. While the launch this week of the new ‘KleptoCapture’ task force means more resources will be devoted to tracing Russian oligarchs’ assets, the DOJ launched a broader initiative focused on overseas klepocrats’ ill-gotten gains in 2010. That unit in 2013 reached a settlement with the vice president of Equatorial Guinea that required him to hand over more than $30 million in assets he obtained through corruption, including a Malibu mansion and Michael Jackson memorabilia. The same unit was behind the 1MDB settlement. More

Russian 5-year Credit Default Swaps which pay out in the event of a default leapt to a record 2,619 basis points compared to 1,725 basis points on Friday, data from IHS Markit showed.Turkey’s CDS were also up 17 bps at 677 bps, South Africa’s rose 4 bps to 244 bps, China’s climbed 4 bps to 64 bps.The spread on the iTraxx European Crossover index, which measures the cost of insuring exposure to a basket of junk-rated European company debt extended its rise as it jumped 30 bps to its highest since May 2020 at 426 bps. Another iTraxx index which measures the cost of insuring exposure to senior bonds from banks and other financial issuers rose 9 bps to 105 bps, also its highest since May 2020. More

TOKYO (Reuters) -The Bank of Japan may downgrade its economic assessment at next week’s policy meeting as a spike in Omicron COVID-19 infections dealt a bigger-than-expected blow to consumption, said four sources familiar with its thinking.The central bank may also warn of heightening economic risks from the Ukraine crisis, which threatens to dent consumption and corporate profits through soaring energy costs, they said.”After recovering late last year, consumption seems to have slumped as Omicron and coronavirus curbs kept people home,” said one of the sources, a view echoed by three more sources.”The economy didn’t do well in the first quarter,” and may struggle to gain momentum due to the fallout from the war in Ukraine, a second source said.At the two-day meeting ending on March 18, the BOJ will thus consider offering a bleaker view on the economy and consumption compared with its previous meeting in January, the sources said.In January, the BOJ said the economy and consumption were “showing clearer signs of pick-up”.The central bank, however, is likely to keep monetary policy steady next week and put off until a subsequent meeting in April a decision on whether to maintain its forecast that the economy is on track for a recovery, the sources said.”There’s simply too much uncertainty now to gauge the impact on Japan’s economic outlook,” a third source said. The sources spoke on condition of anonymity because they are not authorised to speak publicly.The persistent drag from the pandemic and rising commodity costs from the Ukraine crisis have cast doubt on the BOJ’s view the economy is likely to improve thanks to continued strength in global demand and an expected rebound in consumption.Longer run, the BOJ expects robust corporate profits to boost capital expenditure and wages – a view also under threat as soaring raw material costs squeeze corporate profits.After expanding an annualised 5.4% in October-December last year, Japan’s economic growth will likely grind to a near halt this quarter as COVID-19 curbs and supply constraints weigh on a fragile recovery, a Reuters poll showed.The BOJ will conduct a quarterly review of its growth and inflation projections at its April 27-28 meeting. More

Russians are bracing for an uncertain future of spiraling inflation, economic hardship and an even sharper squeeze on imported goods. The rouble lost around a third of its value last week, after unprecedented Western sanctions were imposed to punish Russia for invading Ukraine. The moves froze much of the central bank’s $640 billion in reserves and barred several banks from global payments system SWIFT, leaving the rouble in free-fall.Cities across Russia were outwardly calm, with little sign of the crisis devastating financial sector and markets. Except for the lines of people looking to stock up on products – mostly high-end items and hardware – before shelves empty or prices climb further.”The purchases that I planned to make in April, I urgently bought today. A friend from Voronezh also told me to buy for her,” shopper Viktoriya Voloshina told Reuters in Rostov, a town 217 kilometers (135 miles) from Moscow. Voloshina said she was looking for office shelves and tables and also shopping on behalf of a friend from another town. “My heart is breaking,” she added.Dmitry, another Moscow resident, lamented rapid price rises.”The watch I wanted to buy now costs around 100,000 rubles, compared to 40,000 around a week ago,” he said, declining to give his surname.But the spending burst may peter out.While there is no palpable sign of panic, the wipe-out of rouble savings and the doubling of interest rates to 20% will squeeze mortgage holders and consumers. Financial conditions — reflecting availability of credit in the economy — have tightened brutally this year, which Oxford Economics predicted would shrink domestic demand by 11% by year end and raise unemployment by 1.9 percentage points in 2023. Zach Witlin, an analyst at Eurasia Group, notes sanctions are already hitting consumers via prices hikes and digital payments disruptions. While consumers are not directly targeted, “fear and caution are exaggerating the impact,” with the exit of foreign brands such as IKEA creating a “snowball effect,” he added.IMPORTS TO ISOLATIONCars, machinery and car parts comprised nearly half of Russia’s $293 billion imports last year, according to the Federal Customs Service.The government’s strenuous import cutbacks in recent years mean 2021 imports remained 7% below 2013 levels, before the first sanctions following Russia’s 2014 annexation of Crimea.It has also beefed up trade with China, which is the only country to boost exports to Russia since 2014. But further declines look inevitable as the rouble plunges, insurers refuse cover to businesses exporting to Russia and shippers back away from Russian ports whether to export or to import.While only a few Russian companies are targeted by sanctions “all of them will feel the chilling effect,” said Matt Townsend, sanctions partner at law firm Allen & Overy. “This is why sanctions are a very effective measure to isolate a country.”The immediate economic shock will cause a 35% GDP contraction in the second quarter and a 7% decline in 2022, JPMorgan (NYSE:JPM) predicted. But “growing political and economic isolation will curtail Russia’s growth potential in years to come,” it added.That may come about if restrictions “limit the acquisition of technology needed to support Russia’s highest value industries,” RBC Global Asset Management warned. The Biden administration is preparing rules to curb Moscow’s ability to import smartphones, aircraft parts and auto components. But multinationals, from tech firms Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) to consumer goods producers Nike (NYSE:NKE) and Diageo (LON:DGE), have severed links with Russia, meaning shoppers will have limited access to the consumer goods they have grown accustomed to over three decades.Chinese companies, so far staying put, could grab some market share but they too could fall prey to secondary sanctions as many of their products such as smartphones use U.S. origin technology.Some Russians are not staying to find out. Lidia, a freelance worker from Rostov said the money transfer curbs were complicating receiving payments from abroad.”The sanctions have hit me very hard. Prices are already up around 20%…It’s a fact that you already can’t buy some medicines. Things will get worse,” she said. “Today my family and I are leaving Russia.”  More

How much more pain is about to hit Russia’s economy? Can oil rise even higher? U.S. inflation data is due on Thursday, the same day the European Central Bank holds a crucial policy meeting. Here’s your week ahead in markets from Kevin Buckland in Tokyo, Ira Iosebashvili in New York, Tommy Wilkes, Julien Ponthus and Dhara Ranasinghe in London.1/ RUSSIAN PAINAfter a barrage of Western sanctions, Russia’s economy will see a sharp economic contraction and spiking inflation. Debt default risks are on the rise. Aside from the rouble, which has hit record lows, most Russian markets have been shuttered since the West imposed tougher sanctions after Russia’s invasion of Ukraine.Foreign investors are scrambling to pull money out of Russia — if they can. They have found their assets frozen as the sanctions, Russian-imposed restrictions and a lack of liquidity make it impossible to exit. It’s also been tough to work out the full extent of the damage. Asset managers will be hoping for more clarity on just how little their Russian investments are worth, if anything.Many will also be bracing for Western sanctions to go even further and target Russia’s energy industry. Expect more jaw-dropping moves in the rouble and oil prices if they do. U.S. dollar vs Russian rouble https://fingfx.thomsonreuters.com/gfx/mkt/jnpwebjnbpw/rouble.PNG 2/ WHEN’S THE PEAK?Expect data on Thursday to show U.S. inflation surged again in February, confirming what we all know already: the Federal Reserve will likely hike rates in March.Economists forecast headline inflation at 7.8% year-on-year, surpassing January’s four-decade high 7.5% print. War in Ukraine has tempered expectations for aggressive Fed rate hikes but a stronger-than-expected inflation print might rekindle chances of a more hawkish stance. That would hurt risk assets, already rattled by Ukraine-linked uncertainty.The Fed says it’s focused on containing price pressures. Its credibility could be at risk if inflation worsens, eroding household spending power and distorting investment and spending decisions. Friday’s University of Michigan consumer sentiment index could provide a sense of how consumers are faring. CPI https://fingfx.thomsonreuters.com/gfx/mkt/egpbkqjakvq/Pasted%20image%201646259171522.png 3/ ROCK, HARD PLACE, ECBBefore Russia invaded Ukraine, the European Central Bank’s March 10 meeting was expected to accelerate its exit from ultra-easy policies. Inflation at a record high 5.8%, more than double its 2% target, strengthens that case.Here’s the problem. The war, by sparking a fresh surge in energy prices, is causing upward pressure on inflation. At the same time it hurts consumption and economic growth.ECB plans are in turmoil and big decisions on Thursday appear unlikely. President Christine Lagarde may be pressed on whether she expects a rate rise, having last month walked back on a pledge not to lift rates this year. That was before war broke out in Europe, leaving the ECB between a rock and hard place. Money markets scale back ECB rate hike bets https://graphics.reuters.com/EUROPE-MARKETS/gdpzybkonvw/chart.png 4/ TRIPLE WHAMMY The Russian invasion is a triple whammy for euro zone banks, with no immediate fix on the horizon. Western sanctions on Russia hit banks exposed to that country’s companies or hold assets there. It begs the question of whether multinational groups such as Austria’s Raiffeisen or France’s SocGen will divest, or be stripped of their units in the country, and at what cost? Second, ECB rate-hike expectations — which banks were benefiting from — have been revised down sharply. Finally, banking shares are cyclical stocks that investors tend to dump first when the macroeconomic environment sours.The sector has lost over a quarter of its market value in about three weeks. Even if the coming week brings stability, that is a bitter pill for investors who had bought into what was the consensual buy trade entering 2022. Banks https://fingfx.thomsonreuters.com/gfx/mkt/dwvkrlkmrpm/Pasted%20image%201646310865293.png 5/ IT’S THE ECONOMY, COMRADE And in China, it’s the National People’s Congress that hogs the headlines.The annual session of China’s rubber-stamp parliament runs from Saturday for about a week, setting the main economic and policy goals for the year. The key word is stability. On Saturday, China said it would target slower economic growth of around 5.5% this year.Beijing is keen to put its slowing economy back on track heading into an even more important event later this year — the twice-a-decade Party Congress at which President Xi Jinping is almost certain to secure an unprecedented third term as leader. That means stepped-up fiscal stimulus, increased tax cuts and continued easy monetary policy, while any plans for painful reforms – such as a long-awaited “prosperity tax” – put on the back burner. Don’t expect any comment on Ukraine either: China has not condemned Russia’s attack and says Western sanctions on Russia are unfair. China goes for growth https://fingfx.thomsonreuters.com/gfx/mkt/xmvjoebqlpr/Pasted%20image%201646293762459.png More