Economy

European stocks and Wall Street futures dropped, oil rallied, the rouble plunged and the dollar strengthened after new sanctions imposed on Russia heightened tensions across financial markets. The Stoxx Europe 600 share index fell 1 per cent, taking it almost 10 per cent below its January peak. The Stoxx banks sub-index fell 6.7 per cent as traders responded to uncertainty about western allies locking some Russian lenders out of the Swift payments system. Germany’s Xetra Dax lost 2.2 per cent.The moves came after Russian president Vladimir Putin put his country’s nuclear forces on high alert and western powers imposed sanctions on Russia’s central bank in response to the invasion of Ukraine. Futures markets implied the US S&P 500 share index would drop 1 per cent in early New York dealings while the technology-focused Nasdaq 100 would fall 0.9 per cent. Global equities had rallied on Friday as traders reacted to punitive measures against Russia steering clear of the nation’s energy exports. But after financial sanctions against Russia were ratcheted up over the weekend, fund managers de-risked their portfolios, closing out strong bets on the global economy and future central bank policy while loading up on low-risk and easily tradeable assets. “Investors are reducing their active bets,” said Michael Metcalfe, head of macro strategy at State Street. “Right now is a time to take stock, reduce positions and try to assess all the possible outcomes that could arise” from the geopolitical situation, he added. Brent crude, the international oil benchmark, rose 4.2 per cent to $102.3 a barrel. Futures linked to TTF, Europe’s wholesale natural gas price, rose 14 per cent to €105 per megawatt hour.The dollar index, which measures the currency against six others, rose 0.4 per cent. The yield on the two-year US Treasury note dropped 0.09 percentage points to 1.5 per cent, reflecting a significant rise in the price of the debt. “It’s a flight to safety and cash is king at these times,” said Tatjana Greil Castro, co-head of public markets at credit investor Muzinich & Co. “Asset managers will have concerns about clients wanting to take money out and you want to pre-empt that by having liquidity to meet potential redemptions.”The rouble dropped as much as 29 per cent to almost 118 against the US dollar on Monday morning, later trimming some of its declines. Russia’s central bank more than doubled interest rates to 20 per cent on Monday and banned foreign selling of local securities in a bid to stem the fallout from sanctions.A FTSE index of emerging market stocks also outperformed on Monday, trading flat, as investors backed out of a popular trade based on betting against developing economies that remain affected by high rates of coronavirus. “If investors have sizeable positions away from their target benchmark, these positions may feel too risky at the moment,” Metcalfe said. “One of the active bets many have had is to be underweight [emerging markets] so slightly perversely they have to buy back.”

Elsewhere, shares in BP dropped 6.1 per cent after the British group said at the weekend it would divest its near 20 per cent stake in Russian state oil provider Rosneft. In Asia, Hong Kong’s benchmark Hang Seng Index fell as much as 1.6 per cent to its lowest level in almost a year before paring losses to close down 0.2 per cent. More

We’re doing something new, trialling an experiment with audio newsletters read by Microsoft Azure Al. Click here to listen to Trade Secrets and please do share your feedback by completing a short survey, or dropping us a line at [email protected]. Thank you.I wish I’d been wrong last week that the first wave of sanctions weren’t enough to deter Vladimir Putin. But if anything it seems I wasn’t optimistic enough that Germany, with its Nord Stream 2 suspension, was finally twigging it had been far too lenient on Russia. Over the weekend a whole swath of international and particularly European, and particularly German, verities about international relations and trade have been hurled overboard. The disinvestments, asset freezing and travel bans, the Swift payment restrictions, the seizure of Russian central bank assets, let alone the defence spending commitments and arms shipments: all breathtaking.We’ll see in the days ahead what impact this battery of policies has, though the market reaction this morning suggests “a lot”. The still-missing bit is restricting Russian gas exports to western Europe, which are excluded from the US financial sanctions. Germany and other countries continued, bizarrely on the face of it, to buy gas through the pipelines in the days after the invasion.Russia can keep going for quite a while on the hard currency from gas exports even if its central banks’ assets are frozen, so to that extent this shoots a big hole in the sanctions package. However, what it also does is severely deter Russia from switching off the gas to blackmail western Europe in case it bankrupts itself. You aren’t much of a monopolist if you don’t have the power to cut production.Below, in a special extended Trade Secrets, we look at how the Ukraine invasion will effect the global trading order, and particularly Europe’s role in it, and the intersection of national security and trade by recalling a recent rather embarrassing incident where the US sided with Russia against Ukraine at the World Trade Organization to punch holes in international law there. Charted waters looks at how regulations have hit cross-border M&A in the pharma sector. Next Monday, the newsletter will be in the extremely capable hands of Trade Secrets alumnus Claire Jones while I take a short break. In the meantime, I’d like to hear your thoughts on any and all trade subjects: as ever, it’s [email protected], the new world order and the EU’s roleI’m writing this from Germany. There’s no better place to observe how a new European and international order is being changed in a crisis. Before the invasion, the 1970s Ostpolitik line of engagement rather than confrontation with Russia had a powerful pull. I found a hugely entertaining interview in the New York Times in 1982 headlined “Helmut’s Pipeline”, in which the NYT’s resident conservative William Safire berated the then chancellor Helmut Schmidt of the Social Democratic party for making Germany dependent on Soviet Russian gas. You can still argue engagement with Moscow was the right idea during the cold war, but it was horrendously ill-suited to Putin’s aggressive Russian nationalism, indeed imperialism. Now Olaf Scholz, an SPD chancellor only a couple of months into office, has overturned decades of German certainties.The EU is changing at lightning speed, its member states arming Ukraine and themselves. It’s particularly impressive given that the EU’s initial response to a new challenge (the eurozone sovereign debt meltdown and the migration crisis) tends to be slow, halting and often wrong-headed.What else is changing in the international order? Suddenly, as a club of rich democracies, the G7 has a role again in coordinating sanctions efforts. China, whose presence was deemed necessary for any serious conversation about global governance, is in a rather uncomfortable position in lining up with Russia.Seizing the moment, Ukrainian president Volodymyr Zelensky is applying for membership. A few member states (including, predictably, Poland) immediately weighed in on its behalf.Before this weekend I’d have regarded Ukraine joining the EU to be somewhat missing the point apart from as a symbolic move to commit Kyiv to looking westwards. As I argued a few weeks ago (it seems like about a decade now), it was the EU assuming that trade on its own could do the job of foreign policy and signing a politicised “deep and comprehensive free trade agreement” (DCFTA) in 2014 that was the trigger for Putin’s seizing of Crimea.There are still significant issues with meeting a bunch of criteria, even assuming Ukraine will emerge as a free and independent country after the war. The DCFTA hasn’t ended economic dysfunction, and the EU really doesn’t need another corrupt and authoritarian country on its eastern flank. But you can now imagine the EU playing at least a supporting if not a primary security role alongside Nato, coordinating elements of national armed forces even without running its own. The EU does in theory have its own mutual protection clause, but not all member states have signed up and there’s no mechanism to put it into action. If the EU wants to become a fully-fledged security power to match its powers in trade, it’s got a long way to travel yet. Mind you, the rate it’s going it’ll be there by Thursday morning.The US’s unwise alliance with Russia at the WTOHeard the one about how the US backed Russia against Ukraine and punched a hole in the web of international law? In 2016, not long after Putin seized Crimea, Ukraine brought a case to the WTO about Russia blocking trade transit across its territory. Russia argued that its actions were justified under a national security exemption to trade rules and it was illegitimate for the WTO dispute settlement system even to judge what its national security needs might be. Traditionally, governments have been sparing in the use of the loophole, acutely aware that widespread use of a self-judging exemption would basically destroy the WTO system. Although not directly affected by the case, the US came down strongly . . . on Russia’s side, one of those decisions that looked bad at the time and worse now.Why back Putin? Because Donald Trump, absurdly, wanted to invoke national security to block imports of steel and aluminium to the US, including those from staunch foreign policy allies like the EU. A makeshift EU-US deal has put that litigation on hold but similar WTO cases brought by other countries remain pending.The Biden administration continues to maintain some of those tariffs and defend those cases. It says that it’s being reliant on imports at all that’s the problem, even if they’re sourced from allies. But for commodities as generic as steel and aluminium that doesn’t pass the laugh test either.Russia won the case against Ukraine, though importantly the ruling did establish that in principle it was legitimate for WTO dispute settlement to assess the validity of national security concerns. Now, it’s true that WTO rules aren’t of the same fundamental nature as the UN Charter’s protection of peace, security and self-determination. It’s also true that the idea of self-judging national security interests is an established one.But that, in a sense, is the point. It’s not a good look for one of the traditional anchors of the multilateral rule-based system, the US, to cheer on a government like Russia’s and misuse national security loopholes itself. If you’re really going to make trade and strategic policy cohere, national security needs to be invoked transparently and judiciously, not to excuse blatant protectionism.The reshoring crowd will no doubt seize the Ukraine invasion to push their case against whatever imports they and industry lobbyists feel like. But if trade is now a purely unilateral self-determining national security tool you might as well pack up the international order altogether and go back to a system of power relations. Having trade policy try to do national security on its own is a mistake, but then so is allowing spurious national security arguments to dictate trade.Charted watersJoe Biden made regulation of drug prices and curbs on mergers and acquisitions in the pharmaceutical sector a priority when he was elected US president.As Biden prepares to deliver his first State of the Union address to Congress tomorrow, many analysts say that the administration’s efforts to boost the power of consumers at the expense of the pharmaceutical industry have had only mixed success.Nevertheless, the uncertainties over drug pricing and the Federal Trade Commission’s flagging of tougher antitrust scrutiny have had a chilling impact on dealmaking, as the following chart shows.

Trade linksThe Ukraine crisis has set back hopes of a swift global economic recovery from the pandemic.The US is trying to cut Russia off from semiconductor supply.FT journalists assess the possible damage to supply chains from a prolonged war in Ukraine.Australian winemakers, seeking alternative export markets after being blocked by China, are marketing a new brand in the US advertised by criminal celebrities including Martha Stewart and Snoop Dogg. More

The Treasury Department on Monday moved to further cut off Russia from the global economy, announcing that it would immobilize Russian Central Bank assets that are held in the United States and impose sanctions on the Russian Direct Investment Fund, a sovereign wealth fund that is run by a close ally of President Vladimir V. Putin.The moves are meant to curb Russia’s ability to use its war chest of international reserves to blunt the impact of sanctions that the United States and European allies have enacted in response to Russia’s invasion of Ukraine.“The unprecedented action we are taking today will significantly limit Russia’s ability to use assets to finance its destabilizing activities, and target the funds Putin and his inner circle depend on to enable his invasion of Ukraine,” Treasury Secretary Janet L. Yellen said in a statement.As a result of the sanctions, Americans are barred from taking part in any transactions involving the Russian Central Bank, Russia’s National Wealth Fund or the Russian Ministry of Finance.The moves represent a significant escalation of U.S. sanctions, although the Treasury Department said it was making an exemption to ensure that transactions related to Russia’s energy exports can continue. It is issuing a “general license” to authorize certain energy-related transactions with the Russian Central Bank.On Saturday, the European Commission, Britain, Canada, France, Germany, Italy and the United States said they would remove some Russian banks from the SWIFT financial messaging system, essentially barring them from international transactions, and impose new restrictions on Russia’s Central Bank to prevent it from using its large international reserves to sidestep sanctions.Russia has spent the last several years bolstering its defenses against sanctions, amassing $643 billion in foreign currency reserves in part by diverting its oil and gas revenues. New restrictions by the United States and its allies against selling rubles to Russia aim to undercut the country’s ability to support its currency in the face of new sanctions on its financial sector. More

Western allies announced sweeping new sanctions against Moscow on Saturday, including Russia’s central bank in a bid to restrict its ability to deploy $640 billion of forex and gold reserves. As part of its role, the Switzerland-based BIS can conduct currency and reserves transactions for its member central banks, which include Russia. “The BIS will not be an avenue for sanctions to be circumvented,” spokeswoman Jill Forde said during a conference call with journalists following its first major report of the year. “The BIS will follow sanctions as applicable”.The head of the BIS’s monetary and economic department, Claudio Borio, said the dramatic events in Ukraine, and the retribution for Russia, meant the global economy was now facing widespread uncertainty.Rising energy and commodity prices will further push up global inflation, while such far-reaching sanctions have never been applied to a country so interconnected in the world economy as Russia.”It is hard to tell where markets will go from here,” Borio said. “The situation has clearly changed”.”Central banks’ challenges have become more complex,” he said, referring to how major central banks such as the U.S. Federal Reserve have been preparing for their first post-COVID pandemic interest rate hikes. More

We’re doing something new, trialling an experiment with audio newsletters read by Microsoft Azure Al. Click here to listen to Swamp Notes and please do share your feedback by completing a short survey, or dropping us a line at [email protected]. Thank you.Continuing on with the topic of my most recent Swamp Notes, I want to explore the impact the war in Ukraine might have on deglobalisation and economic decoupling between the west and Russia/China.As I argue in my column today, there’s a strong case to be made that this is a real pivot point for the global financial system. Sanctions against Russia, although completely necessary, will make that country more dependent on China, which will look to settle more and more energy transactions in renminbi. Witness in the past few days gas deals between the two countries and a lifting of a Chinese export ban on Russian wheat. Commodity hoarding and economic nationalism is just getting started.All of this is part of a long-term strategy by China to reduce its dependency on the dollar; both Russia and China have been increasing gold reserves in recent years as part of this effort. We won’t move to a post-dollar world anytime soon (the dollar is 60 per cent of global reserves), but I wouldn’t be surprised to see the renminbi play a much bigger role in the global financial system within, say, the next decade. I also expect China to speed up its selling of US Treasury bills in 2022, which is going to raise a very tricky issue for the Federal Reserve, which is starting its own programme of quantitative tightening (more on that in a future note).In the US, one immediate question is whether war in Ukraine makes America double down on more economic self-sufficiency (or protectionism, depending on your point of view), or whether inflationary pressures actually push businesses (to the extent that they still can) to source more from China and other countries where supplies are still cheap.As I noted a few months back, the Covid-related fears of personal protective equipment shortages didn’t stop various US states from going right back to buying cheap Chinese masks as soon as they were available. As you might remember, China hoarded them at the start of the coronavirus outbreak for obvious reasons. Businesses worried about keeping margins up in the wake of already spiralling inflation may be inclined to try and source as cheaply as they can, wherever they can. Certainly, they are lobbying to keep the loopholes that allow them to do so.But, as I argued in a column last week, that may no longer be politically possible. Countries worried about conflict are likely to try and build as much self-sufficiency as possible, looking to bolster national or regional supply chains and to find new sources for raw materials. Witness Germany pulling the plug on Nord Stream 2 (it’s about time) and European politicians starting to talk about speeding up the transition to clean energy in order to reduce dependence on Russia once and for all. See also the semiconductor chip wars that are at the heart of the new Great Power conflict between the US and China, with Europe somewhere in between as per usual.In the short term, though, nobody can go it alone. In an ideal world, US energy could fill the gap for Europe, but Americans are already exporting about as much as they can to the continent (indeed, the lack of additional US shale energy for export is a cudgel that Republicans are now using to try and undermine Joe Biden’s investment in green energy). I’m expecting energy prices to rise and for US shale oil to become very important once again.Meanwhile, Russia and China are drawing closer to Iran.To me, this would be an ideal time for the US and Europe to come together and war game a new energy security strategy to buffer European vulnerabilities in the short term, and a longer-term agreement about how to approach climate change (how wonderful would it be if the two regions together took the lead on cutting-edge clean technology such as green batteries, rather than ceding that territory to China). I also think that they need a strategy not only for de-dollarisation but de-euroisation, as Russian energy no longer flows to the continent.I may be desperately hoping for upside here, but perhaps Russia’s actions have the potential to strengthen transatlantic ties and turn what seemed to be a tripolar world with the US, Europe and China heading in different directions, into a more bipolar one. That would probably be a more stable world. Gideon would you agree? And, to put the question you asked me last week back to you, what am I getting wrong about the European world view?Recommended readingAll of the FT Ukraine coverage has been fantastic, but you should make sure to pay special attention to our up-to-date blog, and also the deep history of Russia and Ukraine in this Weekend piece.Moving on to a different global conflict zone, I thought Jon Lee Anderson did a lovely job in The New Yorker with this on the ground look at how the Taliban are — surprise, surprise — finding it’s not so easy to govern Afghanistan.I was fascinated by this PBS documentary, Augmented, which chronicled the efforts of Hugh Herr, a former rock climber.Gideon Rachman responds With the Ukrainians fighting back and Putin waving his nukes around, it’s hard to concentrate on the economics.But you raise some crucial and fascinating issues. I think one of the Russian calculations from the beginning has been that China would “backfill” for them on sanctions — and that the special relationship between Putin and Xi would mean that Russia could never be isolated, and the economic damage could be managed. I think the Chinese would like to help. But they will be thinking very carefully about the risk of American and EU secondary sanctions. What if a Chinese bank tries to do business with one of the Russian financial institutions that the west has targeted — such as Sberbank or VTB. Might they find themselves targeted by American financial sanctions and cut off from the dollar market? Chinese financial institutions have been wary of running that risk — even when their own nation’s interests are in play. My favourite anecdote on this topic is that Carrie Lam, Hong Kong’s chief executive officer, cannot find a bank that will deal with her — even in Hong Kong — and has to be paid in cash because she has been targeted by US sanctions.The same goes for semiconductors. Will Chinese suppliers fill the gap left by the west in the Russian market? Very tempting — unless it means you get cut off from US tech and markets, as a result.Finally, you ask about European attitudes. I think there has been a total mood shift in the past couple of days. Look at the shifts by the German government on military aid to Ukraine, on a Swift ban for Russia and on the Nord Stream 2 pipeline. These are policies that Germany has opposed for many months, if not years. But they have been pushed through in days. I think Europeans suddenly feel that peace on their continent and their freedom is at stake, and they are now ready for some economic hardship in order to hit back at Russia. The transatlantic alliance has also been revived, and I give credit to the Biden administration for their patience in working with the Europeans. I shudder to think what would have happened if Trump had been in power.Edward Luce is on book leave and will return in mid-March.Your feedbackAnd now a word from our Swampians . . . In response to ‘Biden, Trump and the “who lost Ukraine” debate’:“If the US and Europe would have had more foresight when the Berlin Wall fell and Gorbachev was open to democracy. We should have pumped money in there to reboot their economy, Russia would have been a democracy by now. We left them in the cold then, missed our chance and are harvesting the results now.” — Pieter Walraven, Unawatuna, Sri LankaIn response to ‘It’s the geopolitics, stupid’:“Is it really important for the US to concentrate on the proliferation of democracy in the world rather than simply becoming a good citizen of the world and minding its own business? . . . If you look at the continental European constitutions of labour rights, you will notice that in our factories and offices the workers are much more invited and empowered to raise their voices than even in the US.” — Hartmut Oertel, Freiburg, Germany More

The measures come on top of sanctions already in place since Russia’s annexation of Crimea in 2014.According to the EU, the sanctions are designed “to cripple the Kremlin’s ability to finance the war, impose clear economic and political costs on Russia’s political elite responsible for the invasion and diminish (Russia’s) economic base”.This is a list of the measures agreed so far:RUSSIA’S CENTRAL BANKThe EU has frozen part of what it calls “Putin’s war chest” by banning its transactions and freezing all its assets in the EU. This is meant to make it impossible for the central bank to liquidate its assets. SWIFTA certain number of Russian banks, representing 70% of the country’s banking market, are to be cut off from SWIFT, the world’s dominant global payment system. The moved is intended to harm their ability to operate globally, stopping the banks from conducting most of their financial transactions worldwide and effectively blocking Russia’s exports and imports.RUSSIAN STATE-OWNED MEDIAThe EU is set to tackle what it calls “the Kremlin’s media machine”, banning state-owned broadcaster Russia Today, the news agency Sputnik and their subsidiaries. The move is intended to make sure they “will no longer be able to spread their lies to justify Putin’s war and to sow division in the Union”.AIRSPACEThe EU has shut down its airspace for Russia, banning all Russian aircraft from taking off, landing or overflying the EU. The ban applies to all aircraft, no matter whether they are owned by Russians, registered in Russia or controlled by Russian individuals or companies – including private jets owned or chartered by oligarchs.WEAPONSFor the first time in its history, the EU has agreed to use its funds for purchasing and delivering weapons to Ukraine. 450 million euros are earmarked for buying arms, another 50 million euros will be used for financing other supplies such as fuel or medical equipment.BELARUSThe EU has agreed to hit Belarus, which it sees as complicit in Russia’s invasion of Ukraine, with further sanctions. The bloc aims to stop Belarusian exports of mineral fuels, tobacco, wood, timber, cement, iron and steel.BLACKLISTINGSThe EU has blacklisted hundreds of additional people, many of them members of the Russian parliament who voted for the recognition of the breakaway regions in eastern Ukraine. Their bank accounts in the EU are now frozen and they are banned from travelling to the bloc.The most prominent individuals on the blacklist are Russia’s President Vladimir Putin and Foreign Minister Sergey Lavrov, although they are exempt from the travel ban. This is meant to enable negotiations with them should the opportunity arise.Still, Putin is now one of only three world leaders blacklisted by the EU, along with Syria’s Bashar al-Assad and Alexander Lukashenko of Belarus. The blacklist currently includes 654 individuals and 52 entities in total.ENERGY SECTORThe sanctions ban the export of specific refining technologies, making it harder and more expensive for Russia to modernise its oil refineries. They add to an existing oil equipment ban imposed in 2014. Russia earned 24 billion euros in 2019 from refined oil exports to the EU, according to the bloc.TRANSPORT SECTORThe EU has banned the export, sale, supply or transfer of all aircraft, aircraft parts and equipment to Russia as well as all services related to the repair, maintenance and financing of aircraft. Three-quarters of Russia’s commercial air fleet were built in the EU, United States and Canada, according to the EU. The sanctions mean that “Russia will not be able to maintain its fleet to international standards”, the EU said.DUAL-USE GOODS AND ADVANCED TECHNOLOGYThe EU has toughened existing sanctions on goods that can be used for civilian as well as military purposes, targeting Russia’s and Belarus’ military-industrial complex and limiting their access to advanced technology such as drones and software for drones, software for encryption devices, semiconductors and advanced electronics.These measures are meant to downgrade Russia’s technological capabilities over time. DIPLOMAT VISASRussian holders of diplomat passports will no longer enjoy visa-free travel to the EU, and Russian government officials and business people will no longer benefit from lower fees when applying for a visa. This measure will not apply to Russian citizens in general, who will retain the benefits they currently have.TRADE WITH BREAKAWAY REGIONS IN UKRAINEThe EU has imposed an import ban on goods from breakaway regions in eastern Ukraine, on doing business with tourism services there and on exports of certain goods and technologies. More

The bank has also introduced some capital controls as the West seeks to restrict its ability to deploy $640 billion of forex and gold reserves and cut Russia’s major banks out of the SWIFT financial network, making it hard for lenders and companies to make and receive payments. Those moves have sent the rouble tumbling to record lows.”The economic reality has considerably changed,” Kremlin spokesperson Dmitry Peskov told reporters. “These are heavy sanctions, they are problematic, but Russia has the potential to offset the harm.” “Russia has been making plans for quite a long time for possible sanctions, including the most severe ones. There are response plans, they were developed and are being implemented as problems appear.”Peskov said sanctions introduced against President Vladimir Putin himself were pointless.”(Putin) is quite indifferent. The sanctions contain absurd claims about some assets,” Peskov said. “The president has no assets other than those he has declared.” The West is seeking to punish Russia for its invasion of Ukraine. Russia calls it a “special military operation” aimed at protecting civilians. Putin will work on economic issues today, Peskov said, meeting with officials including Central Bank Governor Elvira Nabiullina, Finance Minister Anton Siluanov, and German Gref, CEO of dominant lender Sberbank. Asked about the central bank’s handling of the crisis, Peskov said: “We have had no reason to doubt the effectiveness and reliability of our central bank. There is no reason to doubt it now.” More

Investing.com — Fresh Western sanctions trigger financial panic in Russia and sharp falls in equities worldwide. The dollar and gold rise. Vladimir Putin puts his nuclear forces on high alert after “unfriendly” moves, while Europe awakes from a 30-year slumber on defense policy. In the U.S., New York City lifts its mask mandate and Lucid Motors is set to report earnings. Here’s what you need to know in financial markets on Monday, 28th February.1. Russian assets tumble after fresh sanctionsThe Russian ruble tumbled after new western sanctions effectively froze over half the foreign reserves of its central bank and shut selected Russian banks out of the global financial messaging network SWIFT. That move will stop almost all payments into and out of Russia, except those directly linked to payment for Russian energy exports.News of the sanctions triggered mass runs on deposits at Russia’s banks, Around 30% of Russian retail deposits are held in foreign currency.The Central Bank, which doubled its benchmark rate to 20% to defend the ruble, said that Russia’s stock exchanges would remain closed all day, but depositary receipts of Russian companies listed in Europe, fell sharply, as did Russia-themed ETFs. Governor Elvira Nabiullina will hold a press briefing at 8 AM ET (1300 GMT).2. Putin puts nuke forces on high alert as EU steps upIn addition to the financial measures announced, the weekend also saw major shifts in European foreign policy, as the continent was jolted into a new assessment of political realities.Germany announced its biggest increase in defense spending since the end of the Cold War and vowed to spend above the amount recommended for NATO members in the future. The European Union for the first time ever said it would ship lethal weaponry to another country and closed its airspace to Russian commercial aircraft.On the battlefield, Ukrainian forces continued to frustrate Russian attempts to seize major cities across the country. Unverified reports and social media footage suggested that Russia had responded by launching missile barrages against cities such as Kharkiv to break their resistance.On Sunday, Russian President Vladimir Putin had placed his country’s strategic nuclear forces on high alert, describing the move as a response to ‘hostile’ actions by the West against Russia.Despite this, Ukrainian and Russian diplomats are due to meet on the Ukraine-Belarus border later.3. U.S. stocks set to open sharply lowerU.S. stock markets are set to follow European markets lower when they open later, in a response to the political and military developments.By 6:15 AM ET, Dow Jones futures were down 443 points, or 1.3%, while S&P 500 futures were down 1.5% and Nasdaq 100 futures were down 1.4%.HP (NYSE:HPQ), Lucid Motors (NASDAQ:LCID) and Workday (NASDAQ:WDAY) are among companies reporting earnings later.The situation was also reflected in a rush for haven assets. The dollar index rose strongly, while the yield on the 10-year U.S. Treasury fell six basis points to 1.92%. Gold futures rose another 1.0% to trade back above $1,900 an ounce.4. Oil and gas prices surge on new fearsCrude oil prices rose sharply, as did European natural gas futures, amid fears that the new sanctions could disrupt energy flows out of Russia, even though they were tailored to avoid doing so.By 6:15 AM ET, U.S. crude futures were up 4.3% at $95.56 a barrel, while Brent crude was up 4.4% at $96.29 a barrel. U.S. Natural gas futures rose 1.5% to $4.538 per thousand BTUs, in anticipation of heightened demand from Europe to cover shortfalls in supplies from Russia.Over the weekend, oil giants BP (NYSE:BP) and Equinor (OL:EQNR) said they will start exiting their Russian holdings. BP envisages a hit of up to $25 billion from a fire sale of its 19.75% stake in Rosneft (OTC:OJSCY), most of it, albeit in the form of non-cash charges.5. NYC to lift mask mandateIn brighter news, New York City said it will lift its mandate on people to wear masks in restaurants and entertainment venues as of March 7, another landmark in the country’s emergence from the latest wave of the pandemic.The nationwide 7-day case rate has now fallen to its lowest since last July.It’s a different story in China, however, where Hong Kong continues to record unprecedented levels of both new infections and deaths. Figures for the Chinese mainland, which are harder to verify, also continue to show rising case incidences. More