Economy

How well did you keep up with the news this week? Take our quiz.Russian forces have seized control of Europe’s biggest nuclear power plant, raising international alarm over Moscow’s warfare during another night of devastating shelling.World leaders condemned the assault on the Zaporizhzhia plant near the southern city of Enerhodar after a blaze broke out at what Ukrainian authorities called “an educational and training building” near the facility. Ukraine’s nuclear inspectorate said firefighters had brought the blaze under control by dawn and there were no casualties or unusual radiation levels reported but it was under the control of Russian forces.The attack evoked memories of the Chernobyl nuclear disaster in 1986 and the fire at the Fukushima nuclear power plant in Japan in 2011. Ukrainian President Volodymyr Zelensky contacted half a dozen world leaders in the early hours of Friday, accusing Russia of deliberately targeting the reactors.Russia’s defence ministry accused Ukrainian forces of staging a “monstrous provocation” at the Zaporizhzhia site.The incident came after another day of brutal bombardment of Ukraine’s urban centres, including a ruinous siege of the port city of Mariupol, whose population of almost half a million is lacking food, water and electricity.At least 22 people were killed in a missile strike on Chernihiv, a city in the north of Ukraine, and Kharkiv in the east remained under constant attack.As civilian casualty numbers mounted, Russian and Ukrainian delegations agreed yesterday to set up civilian evacuation routes out of the hardest-hit cities. However, the talks ended without a ceasefire agreement.Sanctions: The UK threatened to freeze more than £1bn worth of property owned by Russian billionaires and push for greater ownership transparency. France and Germany have detained superyachts belonging to Vladimir Putin’s close associates, while the White House has hit oligarchs and government officials with more sanctions, although it rejected bipartisan calls to ban Russian oil imports.Markets: European and Asian stock markets fell in response to the developments at Zaporizhzhia. In China, meanwhile, amateur investors are driving a rally in so-called “Sino-Russian trade concept stocks”.Financial services: Deutsche Bank is bracing for the loss of a quarter of its investment bank IT specialists as sanctions against Russia threaten to cut off its key software technology centres in Moscow and St Petersburg.Business: Professional services groups Accenture, McKinsey and Boston Consulting Group have joined the corporate exodus from Russia. Accenture yesterday axed its entire 2,300-person business in Russia.Supply chain: The war threatens to pile pressure on the chip manufacturing industry as rare gases critical to the production of semiconductors become scarce.Opinion: Russia cannot simultaneously open fire on democracies while also enjoying the fruits, writes Chrystia Freeland, deputy prime minister of Canada and a former Ukraine correspondent for the Financial Times.How to help: From fundraising to providing shelter, Europeans have moved to help those fleeing the conflict. How to Spend It rounds up five charities providing aid to Ukraine — and the fundraisers supporting them. 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. Sony and Honda plan EV tie-up to take on Tesla Two of the most storied names in Japanese business are teaming up to take on Tesla in the electric car market. They are expected to establish a new company later this year and sell their first cars in 2025. 2. Purdue and US states agree new settlement for opioid litigation Members of the Sackler family, who own Purdue Pharma, have agreed to increase their financial contribution to a settlement with US states over their role in the opioid crisis to $6bn.3. Argentina secures $45bn IMF debt deal Under the agreement, which comes just weeks before a deadline for repayments the country would struggle to make from fast-dwindling reserves, payments will begin in 2026 and end in 2034. However, the agreement must still be approved by Argentina’s congress and the IMF board.4. Billions required to prevent next pandemic, expert warns Governments must invest billions of dollars to prevent the next pandemic, according to the Coalition for Epidemic Preparedness Innovations, which is charged with preparing the world for emerging infectious diseases.5. Plans to revive European Super League attacked Top football bosses have criticised an effort to revive the European Super League, as one of the breakaway contest’s leading advocates insisted he would continue to pursue a radical transformation of the world’s favourite sport.The days aheadUkraine talks Nato foreign ministers and their allies from the EU and G7 meet in Brussels today and are expected to discuss a possible no-fly zone over Ukraine. The UN Human Rights Council will vote on whether to establish a commission of inquiry for one year to investigate alleged human rights violations committed by Russian forces in Ukraine since 2014.US jobs report The world’s largest economy is forecast to have posted another solid month of job gains. Employers are predicted to have added 415,000 jobs in February, according to a consensus forecast compiled by Bloomberg, building on the 467,000 positions created in January. The unemployment rate is expected to fall to 3.9 per cent.2022 Paralympic Winter Games The Games will kick off in Beijing, where Russian and Belarusian athletes have been banned from competing by the International Paralympic Committee. Multiple national paralympic committees were “threatening not to compete” if the nations were included in the Games following Russia’s invasion of Ukraine. China’s National People’s Congress The annual plenary session begins tomorrow, with President Xi Jinping preparing to extend his period in office into a third term. But furore over Xi’s support for Russia and the collapse of his zero-Covid policy in Hong Kong threaten to overshadow the gathering.International Atomic Energy Agency chief in Tehran Rafael Mariano Grossi, the director-general, will meet senior Iranian officials to discuss remaining issues around reviving the Iran nuclear deal tomorrow. (Reuters)What else we’re reading Putin’s war on the liberal order Democratic values were already under threat around the world before the Russian invasion of Ukraine. Now we need to rekindle the spirit of 1989, writes Francis Fukuyama in an essay for the Financial Times.Books review: How did London and the US become safe havens for “dirty money”? These three books examine how the financial centres assumed the role of “butlers” for autocrats.Gillian Tett: War in Ukraine threatens the global financial system, writes the FT’s US editor at large.Borrowed money funded ‘Spac king’ share purchases Chamath Palihapitiya, the former Facebook executive and billionaire tech investor, borrowed money to finance landmark investments while emphasising the importance of Spac sponsors putting their own capital at risk. Here’s how the arrangements indicate he put less personal cash into his deals than had been thought.Hip-hop stars miss out in music catalogue gold rush You might have noticed headlines about musicians selling their life’s work for eye-popping sums of money. But rappers, despite being the backbone of the streaming revolution, are losing out to boomer rock musicians, writes Anna Nicolaou.Reader feedbackThis week we featured an item from our food and drinks team on the world’s leading independent coffee shops and asked for your suggestions. Koishu Kunii got in touch from Paris to recommend two of her favourite outlets in the French capital.“Weekday afternoon in the spring is the best time to visit and fully immerse yourself in coffee with a touch of Vitamin D,” she writes of Fringe, which was opened by former photographer Jeff Hargrove. Brouillon opened late last year and “offers fully alternative experience with consciousness, from cookies made with love and locally sourced produce to homemade kombucha”.Thanks for reading FirstFT and do email us with suggestions or feedback about this newsletter. We love hearing your thoughts. Have a good weekend and I will be back on Monday — Gordon. More

Remote work is often favored by established employees who know their manager, are comfortable in their role and want to balance work with family responsibilities or other personal obligations. For those just starting their careers, working in isolation can make fitting into an organization — and eventually progressing up its ranks — more difficult.Companies have become more open to remote work during the pandemic. Now, as they plan for what work will look like going forward, they’re paying more attention to what it means to build a career without the traditional opportunities for networking, mentorship and visibility that come with a full-time physical office, Corinne Purtill reports for The New York Times.Prithwiraj Choudhury, an associate professor at Harvard Business School who focuses on the changing geography of work, said he had seen three common practices at companies that managed remote work successfully. These companies:Took the time to compile information and practices in handbooks or guides that employees can consult from anywhere.Paired remote workers with mentors outside their department so that they could speak frankly without endangering team relationships.And created what he called the “virtual water cooler.”In one study, Mr. Choudhury and his colleagues randomly assigned some interns at a global bank to take part in one-on-one video meetings with senior executives. Others met virtually with fellow interns, and some were assigned no extra meetings at all. Those assigned to meet with the senior employees had better performance reviews at the end of the summer and were more likely to receive job offers.Managed effectively, remote work can lead to more in-depth conversations, Mr. Choudhury said.Among the employees most likely to prefer remote work are women and people of color, who even before the pandemic often reported feeling underrepresented and isolated in the workplace. Going remote without proper support can create a vicious cycle that exacerbates that sense of alienation while also decreasing the chance that those workers will be pulled in for career- and morale-boosting projects.Sensitive to this unconscious tendency, which organizational psychologists have labeled “proximity bias,” The software developer HubSpot evaluated all of its roles and designated which positions have to be done in the office for legitimate business reasons.“‘I just prefer when I can see people on my team’ — that is not a good business reason,” said Katie Burke, the company’s chief people officer.Some of employees are also giving more thought to what long-term remote or hybrid work might mean for their futures. READ THE FULL ARTICLE → More

The Russian invasion of Ukraine strains the long-held idea that shared interests around business and commerce can deflect military conflict.Russia’s war in Ukraine is not only reshaping the strategic and political order in Europe, it is also upending long-held assumptions about the intricate connections that are a signature of the global economy.Millions of times a day, far-flung exchanges of money and goods crisscross land borders and oceans, creating enormous wealth, however unequally distributed. But those connections have also exposed economies to financial upheaval and crippling shortages when the flows are interrupted.The snarled supply lines and shortfalls caused by the pandemic created a wide awareness of these vulnerabilities. Now, the invasion has delivered a bracing new spur to governments in Europe and elsewhere to reassess how to balance the desire for efficiency and growth with the need for self-sufficiency and national security.And it is calling into question a tenet of liberal capitalism — that shared economic interests help prevent military conflicts.It is an idea that stretches back over the centuries and has been endorsed by romantic idealists and steely realists. The philosophers John Stuart Mill and Immanuel Kant wrote about it in treatises. The British politicians Richard Cobden and John Bright invoked it in the 19th century to repeal the protectionist Corn Laws, the tariffs and restrictions imposed on imported grains that shielded landowners from competition and stifled free trade.Later, Norman Angell was awarded the Nobel Peace Prize for writing that world leaders were under “A Great Illusion” that armed conflict and conquest would bring greater wealth. During the Cold War, it was an element of the rationale for détente with the Soviet Union — to, as Henry Kissinger said, “create links that will provide incentive for moderation.”German Chancellor Olaf Scholz in Moscow last month. Since the fall of the Soviet Union, policies by Germany and other European countries have been partly shaped by the idea that economic ties with Russia could deflect conflict.Pool photo by Maxim ShemetovSince the disintegration of the Soviet Union three decades ago, the idea that economic ties can help prevent conflict has partly guided the policies toward Russia by Germany, Italy and several other European nations.Today, Russia is the world’s largest exporter of oil and wheat. The European Union was its biggest trading partner, receiving 40 percent of its natural gas, 25 percent of its oil and a hefty portion of its coal from Russia. Russia also supplies other countries with raw materials like palladium, titanium, neon and aluminum that are used in everything from semiconductors to car manufacturing.Just last summer, Russian, British, French and German gas companies completed a decade-long, $11 billion project to build a direct pipeline, Nord Stream 2, that was awaiting approval from a German regulator. But Germany halted certification of the pipeline after Russia recognized two separatist regions in Ukraine.From the start, part of Germany’s argument for the pipeline — the second to connect Russia and Germany — was that it would more closely align Russia’s interests with Europe’s. Germany also built its climate policy around Russian oil and gas, assuming it would provide energy as Germany developed more renewable sources and closed its nuclear power plants.Benefits ran both ways. Globalization rescued Russia from a financial meltdown and staggering inflation in 1998 — and ultimately smoothed the way for the rise to power of Vladimir V. Putin, Russia’s president. Money earned from energy exports accounted for a quarter of Russia’s gross domestic product last year.The Nord Stream 2 plant in Germany. The pipeline had been seen as a way to align Russia’s interests with those of Germany. Now it has been shelved.Michael Sohn/Associated PressCritics of Nord Stream 2, particularly in the United States and Eastern Europe, warned that increasing reliance on Russian energy would give it too much leverage, a point that President Ronald Reagan made 40 years earlier to block a previous pipeline. Europeans were still under an illusion, the argument went, only this time it was that economic ties would prevent baldfaced aggression.Still, more recently, those economic ties contributed to skepticism that Russia would launch an all-out attack on Ukraine in defiance of its major trading partners.In the weeks leading up to the invasion, many European leaders demurred from joining what they viewed as the United States’ overhyped warnings. One by one, French President Emmanuel Macron, German Chancellor Olaf Scholz and Italian Prime Minister Mario Draghi talked or met with Mr. Putin, hopeful that a diplomatic settlement would prevail.There are good reasons for the European Union to believe that economic ties would bind potential combatants more closely together, said Richard Haass, president of the Council on Foreign Relations. The proof was the European Union itself. The organization’s roots go back to the creation after World War II of the European Coal and Steel Community, a pact among six nations meant to avert conflict by pooling control of these two essential commodities.“The idea was that if you knit together the French and German economies, they wouldn’t be able to go to war,” Mr. Haass said. The aim was to prevent World War III.Scholars have attempted to prove that the theory worked in the real world — studying tens of thousands of trade relations and military conflicts over several decades — and have come to different conclusions.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

The US economy is forecast to have posted another solid month of job gains in what has become an “extremely tight” labour market, according to Federal Reserve chair Jay Powell.Employers in the world’s largest economy are estimated to have added 415,000 jobs in February, according to a consensus forecast compiled by Bloomberg. That will build on 467,000 positions created in January, and is expected to push the unemployment rate down to 3.9 per cent.The data, which will be released by the Bureau of Labor Statistics at 8.30am Eastern Time on Friday, is also set to show another sizeable jump in monthly wage growth.Average hourly earnings are expected to have ticked up another 0.5 per cent in February, a slight moderation from January’s 0.7 per cent monthly increase. Hourly earnings are forecast to be up 5.8 per cent over the past year. Wages have soared higher this year, especially for lower-income workers, as labour shortages across a broad swath of sectors have prompted businesses to offer better pay to fill a near-record number of vacant positions. US businesses reported 10.9mn unfulfilled positions at the end of last year. The number of job openings has soared compared with historical standards as the US workforce experiences near record turnover, with the number of Americans voluntarily quitting the workforce historically elevated.

While US President Joe Biden cheered the 6.5mn jobs created by the US at his State of the Union address this week, the number of Americans employed or looking for a job remains roughly 1 per cent below pre-pandemic levels. Friday’s report is expected to show the labour force participation rate plateaued in February at 62.2 per cent.The heftier compensation and improved benefits offered by US businesses to lure back workers has coalesced in what Powell said on Thursday was a “great labour market for workers, especially workers at the lower quartile of earnings who are getting the biggest wage increases”.In testimony to US lawmakers this week, Powell said labour market strength alongside very elevated inflation justifies the US central bank proceeding with its plans to raise interest rates this month, despite the prospects of slower growth stemming from Russia’s invasion of Ukraine. Powell said it is too early to know the exact economic ramifications of the conflict, but suggested inflation, which is now running at the fastest pace in four decades, could push even higher given the recent run-up in oil prices to multiyear highs. “Commodity prices have moved up significantly, energy prices in particular. That’s going to work its way through our US economy,” he told members of the Senate banking committee. “We’re going to see upward pressure on inflation, at least for awhile. We don’t know how long that will be sustained for.”Powell said he supports a quarter-point interest rate increase as the first step in a “series” of adjustments this year, with the Fed potentially considering raising rates by larger increments at one or more meetings if price pressures stay elevated. More

Good morning. Allied foreign ministers are meeting both at the Nato headquarters and at the European Council today to assess the sanctions imposed against Russia and to discuss their implementation and potential further measures down the line. The gatherings come after another brutal day of attacks on Ukrainian cities and Vladimir Putin vowing to continue the assault until he wins the war. With the number of Ukrainian refugees abroad now having passed the 1mn mark, we’ll also explore a request from several EU lawmakers for the European Central Bank to open a swap line for the Ukrainian currency, to help people fleeing to EU countries convert their savings into euros. Digesting sanctionsThe EU’s sanctions conveyor belt has slowed in the past 24 hours as member states begin to take stock of what they have implemented, writes Sam Fleming in Brussels.Since Wednesday last week, the EU has pushed through sanctions on dozens of individuals, including Vladimir Putin and some of his closest oligarch allies, as well as on seven Russian banks, the country’s air transport sector, the high-tech industry and sovereign debt. In arguably the most dramatic move of all, it has frozen the assets of Russia’s central bank. It has also hit Belarus’s key raw materials exports, closing loopholes on existing potash sanctions and blacklisting senior military personnel.These actions have been closely co-ordinated with moves by G7 allies — although there are clear differences, including with the UK, which despite its rhetoric has been less aggressive in hitting top oligarchs so far. The question, as foreign ministers gather today for talks with Antony Blinken, US secretary of state, among others, is how rapidly to drive towards fresh measures, and it is here that member states divide.Some argue for a breather, as capitals assess the damage to Russia’s economy and to their own business sectors. They also want to turn more attention to enforcing the expansive new sanctions regime and, in particular, tracing oligarchs’ assets. Other challenges include implementing the EU ban on Kremlin-controlled media outlets Russia Today and Sputnik, which one diplomat said was particularly difficult.“We have been moving at warp speed and partners may need some time to align with packages that are constantly moving,” said a senior EU official. “Let’s let the sanctions bite, and keep the unity.”Other member states, among them Baltic countries and some former eastern bloc nations such as Poland, are eager to do more — and quickly. Ideas put forward include increasing the number of Russian banks cut out of the Swift messaging network — a move that the countries heavily reliant on Russian gas exports are distinctly wary of.Member states have also discussed a shipping ban similar to the one already imposed by the UK. Many want to impose sanctions on the family members of some individuals already on the EU blacklist, as the US has done, to better enforce asset freezes. Lithuania has suggested 25 more individuals to hit. Siegfried Muresan, a Romanian MEP, has called on the European Commission to “restrict the access of Russian companies to all public procurement in the EU”, according to a letter seen by Europe Express. According to the commission’s database, Russian companies have won more than 20 public contracts in Bulgaria, the Czech Republic, France, Germany, Hungary, the Netherlands and Poland in a single year to the tune of more than €150mn, including in strategic infrastructure projects such as railways.Capitals are also discussing measures to prevent oligarchs from hiding their assets in trusts. And the commission is in dialogue with the European Central Bank over rules to make it harder to dodge sanctions via the use of cyber-currencies.Alongside this, perhaps the highest-stakes debate is over whether to target the Russian oil and gas sectors with sanctions. Some member states in central and eastern Europe are in favour, while prominent legislators in the US, including Nancy Pelosi, House Speaker, have advocated a block on Russian oil. The White House ruled it out yesterday. Germany has made it clear that it takes a dim view of the idea. While the EU’s second sanctions package hit the Russian oil refining sector, it left exports of crude and natural gas alone — something Italy also strongly advocated. And the Swift regime launched this week was carefully designed to avoid interrupting European payments for Russian fossil fuels by leaving Sberbank and Gazprombank connected to the network. The bloc gets 40 per cent of its gas and 10 per cent of its oil from Russia. Officials who advocate hitting Russia’s natural resources sector harder argue it is the best way to cripple its economy and Putin’s war machine. But for many EU capitals the damage this would do to their own economies makes it a step too far — at least for now. Chart du jour: Refugee protectionThe number of refugees pouring out of Ukraine to flee the fighting doubled this week, with 1mn arriving in other countries since Russia invaded. EU interior ministers who gathered in Brussels yesterday agreed to grant Ukrainian refugees a special status allowing them to stay and work in the bloc for up to three years. The exception was Hungary, which said it would apply existing asylum rules instead. (More here)Looking for a swap lineThe European Central Bank has been asked by politicians to open an emergency liquidity line with Ukraine that allows its central bank and the war-torn country’s citizens to exchange their hryvnia currency into euros, writes Martin Arnold in Frankfurt.The request puts the ECB in a difficult position, as Christine Lagarde, its president, has expressed her “horror” at Russia’s invasion of Ukraine and expressed her desire to “show solidarity” with its citizens, but officials are dubious it can justify opening a swap line with Kyiv.A group of 22 members of the European parliament said in a letter to Lagarde: “We are deeply concerned by the numerous reports on the difficulty of Ukrainian refugees to convert the Ukrainian hryvnia into other currencies once they arrive on the territory of the EU.”The Polish central bank has offered a swap line to its Ukrainian counterpart, but the MEPs said “this is not the case for all countries that host refugees”. “As Ukrainians are fleeing the war, it is common for them to travel with cash resources, as we know from the media reports on long ATM lines, and they are now unable to convert and use those vital resources,” they said.The Ukraine central bank last month suspended foreign exchange trades and banned banks from issuing cash in foreign currencies. Some commercial banks in other European countries accept Ukrainian bank cards in their cash machines, but many do not. The ECB has not received a formal request for a liquidity line from the Ukraine central bank, according to a person briefed on the matter. Officials think it may be difficult for the ECB to justify such a move, even if a request was made, because of the riskiness of hryvnia-based assets and fears that it would set a precedent for helping war-torn countries.“The ECB can take measures whether or not it is formally in their mandate,” Alin Mituta, a Romanian MEP who signed the letter, told the Financial Times. If the ECB did take such a step, it would prompt other central banks to follow suit, including those in Romania, Poland, Hungary, Slovakia and the Czech Republic, he said.The ECB has swap lines with 16 countries outside the eurozone, including the US, Japan, China, Canada, Switzerland, the UK and Sweden, which provides them with euros in exchange for assets in their currencies to boost liquidity in financial markets.Other central banks can request a repurchase facility with the ECB, under the EUREP facility it launched in 2020 to provide liquidity in euros to a wider group of undisclosed central banks. The ECB declined to comment beyond saying that it would reply to the MEPs’ letter.

Should the ECB open an emergency liquidity line with Ukraine? Click here to take the poll. What to watch today EU foreign affairs council meets in Brussels, including counterparts from the US, UK, Canada and UkraineNato foreign ministers hold an emergency meeting, including with non-Nato partners Finland and SwedenSmart readsNo good (gas) options: Natural gas is Russia’s most potent economic leverage despite the EU’s efforts to reduce its dependency. Moscow’s ability to exploit that reliance could be exacerbated by wide disparities among member states’ needs, writes Bruegel in this policy paper. Hard decisions lie ahead, including for Germany to reopen lignite mines or the Netherlands to expand gas exploitation at the earthquake-prone Groningen field. EU half-awakening: The EU’s recent leaps on common defence and sanctions against Russia are significant and have upended the bloc’s relationship with Moscow, with a phase of protracted “cold” confrontation coming up. However, the Centre for European Reform lays out why there are several reasons to be wary about claims of a “geopolitical awakening”.War on liberal order: Francis Fukuyama writes on how liberalism was in trouble even before Vladimir Putin’s attack on Ukraine and why it will still have an uphill battle globally even if he loses the war. “But the world will have learnt what the value of a liberal world order is, and that it will not survive unless people struggle for it and show each other mutual support. The Ukrainians, more than any other people, have shown what true bravery is, and that the spirit of 1989 remains alive in their corner of the world. For the rest of us, it has been slumbering and is being reawakened,” Fukuyama writes in this piece for FT Weekend. More

WASHINGTON (Reuters) – U.S. employers likely maintained a strong pace of hiring in February, pushing the labor market closer to maximum employment, but rising headwinds from geopolitical tensions could hurt business confidence and slow job growth in the months ahead.The Labor Department’s closely watched employment report on Friday is expected to show labor market conditions tightening further, with the unemployment rate resuming its downward trend and a shortage of workers continuing to drive up wages. Federal Reserve Chair Jerome Powell this week described the labor market as “extremely tight,” and told lawmakers that he would support a 25-basis-point interest rate increase at the U.S. central bank’s March 15-16 policy meeting and would be “prepared to move more aggressively” later if inflation does not abate as fast as expected.Oil prices have surged above $100 a barrel since Russia launched a war against Ukraine last Thursday, invoking a barrage of sanctions against Moscow by the United States and its allies.”The employment report will show the U.S. economy is healthy and continuing to move forward,” said Sung Won Sohn, a finance and economics professor at Loyola Marymount University in Los Angeles. “But geopolitical problems will push inflation higher, and have created a tremendous amount of uncertainties that will put a damper on economic growth and jobs going forward.”The survey of establishments is likely to show that nonfarm payrolls increased by 400,000 jobs last month after rising by 467,000 in January, according to a Reuters poll of economists.That would leave employment 2.5 million jobs below its pre-pandemic level. Economists expect all the lost jobs will be recouped this year. February payrolls estimates range from as low as a 200,000 to as high as a 730,000 jobs gain.Payrolls increased strongly in January, despite a record 3.62 million people being absent from work in the middle of that month because of illness, when the nation was reeling from a winter wave of cases caused by the Omicron variant of COVID-19. Infections have since declined sharply. The Census Bureau’s Household Pulse Survey showed about 7.8 million people were not at work in early February because they were caring for someone or were sick with coronavirus symptoms, down 1 million from early January. The number of people on state unemployment benefits was the smallest in 52 years in mid-February. Also arguing for strong job gains, data from Homebase, a payroll scheduling and tracking company, showed substantial increases in the number of employees on the job as well as hours worked in mid-February. Shift work in February recorded its largest monthly gain since the spring of 2020, another survey from workforce management software company UKG showed. DOWNSIDE RISKSBut payrolls could come in below expectations after an Institute for Supply Management survey on Thursday showed a measure of services sector employment contracted in February for the first time since last June. The ISM reported earlier this week that manufacturing employment growth slowed last month.The Fed’s Beige Book report on Wednesday showed “widespread strong demand for workers remained hampered by equally widespread reports of worker scarcity.” There were a near record 10.9 million job openings at the end of December.”I’m biased more towards a softer payrolls number, but with a pretty good wage figure,” said James Knightley, chief international economist at ING in New York. “All the evidence does suggest that companies are trying to recruit staff and also retain staff as well because of these high turnover statistics.”Job gains last month were likely concentrated in the leisure and hospitality industry as well as retail and other sectors which were hardest hit by Omicron in January. Moderate gains in professional and business services employment are likely as the ISM survey showed businesses in this industry were “struggling to hire direct employees and non-employee labor.” The unemployment rate is forecast falling to 3.9% from 4.0% in January. Economists believe the labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, likely increased last month.With workers scarce, average hourly earnings are forecast rising 0.5% in February after increasing 0.7% in January. That would lift the year-on-year gain in wages to 5.8% from 5.7% in January. Wages were boosted in January as Omicron kept some lower hourly paid workers at home. Economists said February’s employment report would support a 25 basis points rate hike from the Fed this month. In the wake of January’s employment report and hot inflation readings, financial markets priced in a half percentage point hike. But that is now off the table amid worries about fallout from the Russia-Ukraine war. Economists expect as many as seven rate hikes this year.”Indeed, the current energy price shock creates a real bind for central bankers,” said Gregory Daco, chief economist at EY-Parthenon in New York. “Given the high-inflation environment, Fed policymakers will want to balance the risk of a ‘stagflationary’ shock and a shift to a higher inflation regime with the risk of normalizing policy too rapidly and precipitating the ongoing tightening of financial conditions.”The workweek, which was impacted by Omicron in January, is forecast increasing to 34.6 hours from 34.5 hours. More

Russia’s invasion of Ukraine has increased inflationary pressures including for energy, food and other commodities, and depressed the economic growth outlook, the head of the world’s largest sovereign wealth fund has said.Nicolai Tangen, chief executive of Norway’s $1.3tn oil fund, told the Financial Times that Russia’s war had intensified concerns about the two factors he thought could pull down financial market returns over the next decade.“This is amplifying the inflationary pressure we’re seeing, through oil and energy, food input, input into fertilisers and other more materials. It’s making that situation more problematic. It’s also negative for economic growth,” he added.Tangen warned in an interview with the FT in January that investors faced years of low returns as high inflation becomes a permanent feature of the global economy, dubbing himself “team leader for team permanent” in the debate on whether the rise in inflation is transitory or not.Trond Grande, the fund’s deputy chief executive, said the striking financial sanctions unveiled against Russia such as cutting banks off from the Swift payments system were “a test of the resilience of the system”.“The government bodies imposing these sanctions acknowledge that these are potentially a little bit blunt tools. You don’t really know the first, second, third, fourth order effects of how it impacts everyone,” he said.Tangen said the sanctions could affect the global supply chain as well as food and energy supply.The comments of the two executives came as the oil fund reported on Thursday that its Russian holdings were probably worthless after tumbling in value by 90 per cent in the past two weeks.Tangen said the fund had largely written off its Russian holdings after the Norwegian government at the weekend ordered them to be frozen and eventually sold.The oil fund had NKr27bn ($3bn) in Russian equities at the end of 2021, and they were still worth more than NKr25bn two weeks ago, before plunging to about NKr2.5bn on Thursday. Tangen conceded even that figure was highly uncertain.

Tangen said the fund had held an investment meeting on February 24 — the day of Russia’s invasion of Ukraine — and decided not to change its holdings. He said in an interview the day after that he did not want to sell its Russian shares because it would enable oligarchs to pick them up on the cheap.But he was overruled on Sunday by Norway’s centre-left government, who overturned decades of policy that the fund was purely a financial investor and not a political tool by ordering it out of Russia.“It was no investment decision, it was a political decision,” Tangen said. But he added that he did not think the decision would lead to other countries regarding it as a political fund. “It is an extraordinary situation right now,” he stressed. The fund, which on average owns 1.4 per cent of every listed stock globally, is down 6.1 per cent this year to date, while its equity holdings are down about 8 per cent. More

The writer is an investment director at GAMThe implosion of Russia’s financial markets following the country’s invasion of Ukraine is not the first crisis to befall emerging markets. Nor will it be the last.Since emerging markets were popularised as a collective asset class in the 1980s and 90s, there have been events like the Asian financial crisis, the 1998 Russia debt crisis and Argentina’s serial defaults. The scale of such episodes are a reminder of the risks that come with returns in emerging markets. But even notoriously amnesiac investors will take a long time before they regain trust in Russian markets.Those unfortunate enough to be caught with investments in Russian assets should obviously attract limited sympathy while Ukrainian civilians are being bombarded. But the combination of western sanctions on Russia in response to its aggression and Moscow’s response has severely disrupted Russian markets — including, crucially, sending the rouble spiralling. Index provider MSCI is removing Russian stocks from its widely tracked emerging markets indices and is likely to record the last price for them as “effectively zero”. Holders of Russian rouble bonds have either left their holdings marked at stale prices or marked them down in line with the external debt. The endgame there looks to be similar.Cutting some of Russia’s banks from the Swift financial messaging system has drawn many headlines but the most powerful international action was to freeze the foreign reserves of the Russian central bank. It is this that caused the 25 per cent drop in the rouble after the sanctions were announced, and this which prompted the effective declaration by Moscow of economic hostilities on foreign investors.The central bank first instructed local investors not to bid for assets held by foreigners, next froze foreigners’ accounts and then dictated that dividends and coupons would not be paid to foreigners. Neither equity nor bond markets had been reopened at the time of writing.Russia might believe it is self-sufficient in capital. After the experience of the 1998 financial crisis, the country opted for rigid fiscal discipline and has been running a sustained current account surplus. So the combination of capital controls and sanctions should in theory not require a significant adjustment at the macroeconomic level. However, that theory is reliant on sanctions not inducing big changes in behaviour. This seems optimistic.More important is the effect on the rouble. Since the end of communism, convertibility of the rouble was crucial to restoring the domestic currency as a store of value.At least part of the rationale for preventing foreigners from selling Russian assets was to reduce the pool of roubles looking to buy foreign currency. The situation is clearly perilous. Before sanctions were announced, a dollar was worth 83 roubles in the market. Three days later, the currency market rate touched 122, while ordinary Russians faced much higher retail rates — where there were dollars available at all. Financial uncertainty leads to capital flight — the proximate cause of the 1998 meltdown.The Russian authorities have boasted of how little the country relies on imports. It is comfortably self-sufficient in food and energy. However, Russian industry is reliant on western machinery and parts. And Russia’s efforts to prepare for sanctions have also been heavily reliant on China.China is unlikely to match western sanctions. It is an eager buyer of Russian resources and Moscow is also the biggest foreign holder of Chinese bonds, according to ANZ. But there would be an irony if Russia’s attack on Ukraine left it at the mercy of a richer, more populous neighbour.The good news for international investors is that almost none of the factors that caused the 1998 debacle are in place. The default then triggered a chain reaction that ripped through highly leveraged markets, starting at hedge fund Long Term Capital Management. There is now far less leverage applied in emerging market assets and the run-up to the Russian attack was drawn out, giving some investors time to adjust.But what this week has illustrated is how important access to international capital markets have been for Russia. It has allowed the country to import a degree of institutional certainty — vast foreign reserves in reserve currencies and the use of western courts for dispute resolution. These are not available to a country with arbitrary government. And the current crisis serves as an excellent example of what can go wrong for investors braving erratic jurisdictions in search of higher yields. More