Morning Update

Yesterday, Ukrainian forces continued to ramp up drone attacks on oil refineries in the Russian interior in an effort to disturb the country’s economy. Strikes took place in places such as Ryazan, Kstovo and Kirishi which make up roughly 10% of Russia’s oil processing capacity.

This comes as Ukraine-backed Russian paramilitary units opposed to Putin conducted cross-border operations into Russia earlier in the week. For example, the BBC reported that The Freedom of Russia Legion (FRL) and Siberian Battalion (SB) “posted videos purportedly showing their fighters in Russia’s Belgorod and Kursk regions.” While the numbers of casualties have not been verified, Moscow have said that they stopped the incursions.

This comes as gridlock on Capitol Hill means that a US foreign aid package worth $95bn – with $60bn earmarked for Ukraine – continues to struggle to get through the House of Representatives, having cleared the Senate earlier last month.

As the stalemate continues, yesterday, the Biden Administration announced that Washington will send Kyiv a fresh military aid package worth $300m. Here the US’ National Security Advisor Jake Sullivan said that “It is nowhere near enough to meet Ukraine’s battlefield needs and it will not prevent Ukraine from running out of ammunition”.

The Prime Minister has announced that the government will build a number of new gas power stations across the UK to better sure up energy security. In an article written for The Telegraph, Rishi Sunak said that the projects are the “insurance policy Britain needs to protect our energy security”.

Following Sunak’s article, in an announcement by the Energy Secretary on Tuesday, Claire Coutinho laid out plans to extend the life of existing unabated gas power plants.

While the government maintains that their measures are consistent with their net-zero plans (to shift all electricity generation to clean sources by 2035), the plans have been met with backlash given that they do not involve carbon capture. For example, the Liberal Democrat energy and climate change spokesperson Wera Hobhouse said that it represented “another step backwards on the critical road to net zero”.

Today’s data includes the release of US retail sales figures at 12:30 where the market consensus is pointing to a month-on-month print of 0.8% for February. This would mark a sizeable increase from last month’s print which came in at -0.8%, well below the forecasted 0.1% contraction. With last month’s figure representing the greatest fall since March 2023, the consensus projects the figures to rebound to the highest rate of increase since September 2023.

12:30 will also see the release of the latest PPI figures where the market consensus is estimating the annualised print to rise 20bps from 0.9% in January to 1.1% in February. With last month’s print coming in 30bps above expectations of 0.6%, the market will be considering how the print could influence the future pathway of the Fed, not least following US CPI (annualised) rising 10bps to 3.2% during February.