Ukraine & Russia​​​​​​
In response to the recent developments in Eastern Ukraine, yesterday saw various Western countries outline punitive economic sanctions intended deter and dissuade further Russian aggression. In the US, the White House stated that they would sanction the Russian state development corporation, VEB.RF Bank while in the UK, Johnson announced that five banks would be sanctioned, in addition to three high net worth individuals. In Germany, Olaf Scholz further stated that the Nord-Stream 2 project would not be authorised – which was significant given that the speed and scale of this announcement relative to other Western countries. This sparked reactions in Moscow stating that gas prices could double, exacerbating the existing energy crisis.

Vyacheslav Nikonov, the First Deputy Chairman of the State Duma Committee on International Affairs stated that the Kremlin is well prepared for sanctions and there were sufficient sovereign funds and foreign exchange reserves to maintain three to four budgets. Moreover, Nikonov stated that that the Russian Federation were in fact expecting greater sanctions and said that Russian economists expect the sanctions to cause a 2% loss to GDP. Hence Nikonov (the grandson of the Foreign Minister under Joseph Stalin, Vyacheslav Molotov) went further to say that the Western sanctions introduced yesterday were “a laughable affair”.

Unsurprisingly, the Duma ratified Putin’s request to recognise the state sovereignty of the two separatist regions of eastern Ukraine, the ‘Donetsk People’s Republic’ and the ‘Luhansk People’s Republic’ thus formalising it in Russian law. Moreover, the Duma authorised the deployment of Russian military forces in the two regions – sending a clear signal of escalation. It also became clearer that Moscow’s recognition of these two region’s sovereignty extends to the whole of the Oblasts of Donetsk and Luhansk – not merely the separatist held areas (which account for around 30% of the two Oblast’s area). Hence, given that Ukrainian forces have a significant presence across the two Oblasts, the possibility of a clash between Russian and Ukrainian forces there is significant.

Two of Russia’s key allies, Nicaragua and Syria have also backed Russia’s decision to recognise the sovereignty of the two regions, which as discussed yesterday was largely expected.

In other developments, Biden appears to have withdrawn the suggestion of a summit with Putin and Blinken will no longer meet Lavrov tomorrow – as was previously planned. The White House’s rationale is that since the invasion has begun, the notion of holding diplomatic meetings to avoid an invasion is therefore annulled.

The Telegraph has more:


In the UK, the BoE’s Deputy Governor, Dave Ramsden gave a speech outlining his views on monetary policy and stated that a “modest” tightening of interest rates was needed in order to maintain a balanced approach. This is significant given that Ramsden was one of the four who called for a 50bpt rise when the MPC last met on 3rd February and hence removed some of the likelihood around whether the BoE would vote to raise rates by 50bts on 17th March, as has been speculated by economic commentators.

Over in the States, we saw US’s housing price index (released by the Federal Housing Finance Agency) rise 1.2%, meeting market expectations along with Markit Manufacturing PMI which came in at 57.5pts – above predictions of 56pts. Markit Services PMI also came above expectations of 53pts with a print of 56.7


Lateral Flows
Given the recent announcement concerning the ending of free lateral flow tests, Boots has announced that it will start selling tests at £2.50 each from March or £5.99 each today. In the interest of international context, in the US tests cost between $7 and $20 each while in Germany its considerably lower at around €1.50 to €3 each. Interestingly, in France, though tests cost around €15 each, they are provided free to children, students and the fully vaccinated.


Looking ahead
This morning we had the Royal Bank of New Zealand’s monetary policy decision which saw interest rates rise 25bpts from the existing base rate of 0.75%.

At 11:00 GMT we have data from the GfK Consumer Confidence survey for Germany. Last month, consumer confidence hit -6.7pts and the market is expecting a slight improvement to -6.3pts.

Then, shortly after PMQs, at 13:30 we have the BoE monetary policy report hearings in the palace of Westminster.

Have a great day.


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