The UK government released $530m of its debts to Iran, ahead of Tehran’s release of two British-Iranian prisoners, Iran’s semi-official Fars news agency reported.
The prisoners are Nazanin Zaghari-Ratcliffe, who had been detained by Iran for six years, and Anousheh Ashouri.
Stock markets rally on China stimulus and Ukraine hopes
European stock markets are pushing higher, with the FTSE 100 index in London up 1% at 7,249 while the Germany, French and Italian exchanges are all about 3% ahead. The pan-European Stoxx 600 index rose 2.6%.
Battered stock markets in China and Hong Kong surged after Chinese vice premier Liu He said Beijing will roll out more measures to boost the Chinese economy, as well as favourable policies for its capital markets.
Investors have also been reassured by promising news on the peace talks between Ukraine and Russia. Ukraine’s president Volodymyr Zelenskiy said the talks were becoming “more realistic” while Russian foreign minister Sergei Lavrov said there was “some hope for compromise,” with neutral status for Ukraine – a major Russian demand – now on the table. Talks are due to resume today.
Nearly three weeks into the invasion, Russian troops are stuck outside Kyiv and have suffered heavy losses. They have failed to seize any of Ukraine’s biggest cities, while heavily bombing and largely destroying some smaller towns and cities.
British and Dutch gas prices have eased following earlier increases, after Russian gas pipeline supplies to Europe fell for a second day.
The British day-ahead price fell 3p to 264p per therm, a 1.1% drop, while the Dutch contract lost nearly 4% to €109.70 per megawatt hour.
Norwegian gas exports to Britain are also down today, because of maintenance work on the Aasta Hansteen field.
IEA warns of global oil supply shock
The news came as the International Energy Agency warned of a global oil supply shock if there are large-scale disruptions to Russian crude production.
It said in its monthly oil report that 3m barrels per day of Russian oil and products may not make their way to market from April, as western sanctions bite and buyers hold off. It said:
Surging commodity prices and international sanctions levied against Russia following its invasion of Ukraine are expected to appreciably depress global economic growth. As a result, we have revised down our forecast for world oil demand by 1.3m barrels per day from the second to fourth quarter, resulting in 950,00 barrels per day slower growth for 2022 on average. Total demand is now projected at 99.7m barrels per day in 2022, an increase of 2.1m barrels per day from 2021.
The prospect of large-scale disruptions to Russian oil production is threatening to create a global oil supply shock. We estimate that from April, 3m barrels per day of Russian oil output could be shut in as sanctions take hold and buyers shun exports. OPEC+ is, for now, sticking to its agreement to increase supply by modest monthly amounts. Only Saudi Arabia and the UAE hold substantial spare capacity that could immediately help to offset a Russian shortfall.
Johnson to urge UAE and Saudi to pump more oil
Boris Johnson is in Abu Dhabi today ahead of talks with United Arab Emirates and Saudi leaders to secure more oil from the Gulf, and ramp up pressure on Russian president Vladimir Putin.
The UK and other countries face spiralling energy costs, as oil prices have surged since Russia’s invasion of Ukraine nearly three weeks ago. Brent crude is currently trading at $101.06 a barrel, up 1.1% on the day.
Johnson will ask Saudi Arabia and UAE to pump more oil, but so far they have snubbed US pleas to increase oil production. The two Gulf states are among few Opec oil exporters that have spare capacity to raise output and potentially offset supply losses from Russia.
The British prime minister said before his meetings, with Abu Dhabi crown prince Mohammed bin Zayed and Saudi crown prince Mohammed bin Salman:
The world must wean itself off Russian hydrocarbons and starve Putin’s addiction to oil and gas. Saudi Arabia and the United Arab Emirates are key international partners in that effort.
However, UAE remains committed to current production plans set out by the Opec oil cartel and its allies, a source told Reuters.
Johnson will only be the second major Western leader to visit to Saudi Arabia since the killing of journalist and dissident Jamal Khashoggi by Saudi government agents in Istanbul in 2018. His visit comes days after Saudi Arabia executed 81 men, the largest number in a single day, for decades, for alleged offences ranging from militant groups to holding “deviant beliefs”.
Nickel trading in London has been halted again on its electronic system, due to a technical issue.
The London Metal Exchange said it halted nickel trading to investigate a potential technical issue with its limit down band and will provide an update as soon as possible.
The LME’s three-month nickel contract hit its lower trading limit of 5% when it reopened today, after wild swings in prices forced a rare market shutdown last week.
European shares rise, rouble edges higher ahead of bond payment
European stock markets have got off to a good start. The FTSE 100 index in London is 90 points ahead at 7,264, a 1.2% gain. The French and Italian markets rose more than 2%, while Spain’s Ibex opened 1.7% higher.
While fighting in Ukraine continues, the Ukrainian president Volodymyr Zelenskiy said peace talks between Ukrainian and Russian negotiators looked more realistic, but more time was needed.
The meetings continue, and I am informed, the positions during the negotiations already sound more realist. But time is still needed for the decisions to be in the interests of Ukraine.
The Russian rouble, which has tanked since Russia’s invasion of Ukraine, edged up 1.6% to 108.31 per dollar.
Russia needs to make $117m in bond interest payments today, on two dollar-denominated Eurobonds. Its finance ministry has said it will make the payments in roubles if sanctions prevent it from paying in dollars – a move that markets would regard as a debt default.
The Moscow stock markets remains largely closed by order of the central bank, for the rest of the week. Stocks last traded in Moscow on 25 February. Last week, Russia’s central bank banned selling of dollars and euros in banking branches, in another step to protect foreign currency liquidity held by local banks, as western sanctions have largely cut the country off from the global financial system.
Nickel trading in London has resumed after it was suspended a week ago, with limits on price moves introduced after wild swings triggered a rate market shutdown.
The London Metal Exchange has introduced a 5% limit on nickel price moves. Some traders said they remained cautious and would wait to see how things worked out, according to Reuters.
The LME suspended nickel trading only for the second time in its 145-year history on 8 March, and extended deadlines for those with obligations to deliver physical metal against its contracts.
The price of nickel, which is used to make stainless steel and is a key component of electric vehicle batteries, had already been rising before Russia’s invasion of Ukraine sent prices soaring. Russia accounts for 10% of global nickel production and traders have been worried that western sanctions on Moscow could disrupt supplies.
The trading band today will be $45,674 to $50,482, based on the closing price on 7 March. The LME has said that it will move to a 15% limit similar to the one imposed on other base metals this week for the first time, once the nickel market gets back to normal.
Introduction: Fed to hike rates for first time since 2018
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
European stock markets managed to claw back some losses yesterday, helped by a decline in oil prices below $100 a barrel at one stage, which eased fears that an energy price spiral will damage the global economic recovery from Covid-19, while US markets finished strong higher. Ongoing peace talks between Ukrainian and Russian negotiators also helped calm markets.
Today is a big day for the US economy, with the latest retail sales figures for February to be released ahead of the latest interest rate decision for the Federal Reserve Open Market Committee, America’s central bank.
With US inflation running at 7.9% and likely to head higher, it is all but certain that we will see an interest rate hike of 0.25%, which will push the Fed funds rate range off zero and up to a range of 0.25% to 0.50%. It would be the first rate rise since 2018.
Meanwhile, Russia is due to make two interest payments on bonds today, and there is talk that it could default – however it will have a 30-day grace period to make the coupon payments.
Michael Hewson, chief market analyst at CMC Markets UK said:
European markets look set to open higher this morning, however any rally is likely to find itself pushing against the headwinds of headlines out of Ukraine, as well as the prospect that Russia might default on a bond payment later today. A $117m interest payment is due today on a US dollar bond. Russia has said it will pay in roubles which would start the clock ticking on a potential default.
Asian stock markets rallied, with Japan’s Nikkei closing 1.6% higher and Hong Kong’s Hang Seng surging 8.8%, while the Shanghai Composite Index added 3.5% on hopes of more economic stimulus in China.
Markets bounced back from the previous day’s heavy losses, sparked by rising Covid-19 infections in China and fading expectations for an interest rate cut by the People’s Bank of China. Shanghai issued a working from home directive on Wednesday, while Chinese health authorities reported a slight drop in new Covid cases compared to the previous day.
- 9am GMT: International Energy Agency oil market report
- 12.30pm GMT: US Retail sales for February (forecast: 0.4% monthly rise)
- 6pm GMT: US Federal Reserve interest rate decision and economic projections
- 6.30pm GMT: US Fed press conference