FTSE 100 rises 0.6pc
Ambrose Evans-Pritchard: Vladimir Putin never believed the West would cut off Russian oil: that was a grave mistake
The London Metal Exchange has halted nickel trading and rolled out emergency rule changes after prices surged to an unprecedented $100,000 a tonne.
Nickel, which is used in stainless steel and electric vehicle batteries, surged as much as 11pc in the largest ever move on the 145-year-old exchange. Over the past two days, it’s surged as much as 250pc.
It came amid a massive short squeeze as Russia’s invasion of Ukraine sparked wild swings in commodity prices.
The exchange had introduced rule changes late last night, allowing traders to defer delivery obligations on all its main contracts, including nickel. However, this failed to halt the surge in prices.
Pound falls against euro on defence funding reports
Sterling lost ground against the euro this morning following reports the EU is considering issuing joint debt to fund its defence and energy sectors.
The pound fell 0.4pc to 83.17p. Against the dollar it was little changed at $1.3103.
The bloc is said to be preparing a huge sale of joint bonds to finance energy and defence spending as it looks to bolster its position in response to Russian aggression.
Britain faces £2bn EU fine over import fraud
Britain will be forced to pay back billions of euros to EU member states after the bloc’s top court upheld a ruling over import fraud failings.
The European Commission complained that importers into the UK evaded a large number of customs duties with false invoices and artificially low value declarations for Chinese textiles and footwear.
It estimated that the bloc lost €2.7bn (£2.2bn) from 2011 to 2017 and there were additional potential losses of VAT. All EU members were liable for such financial consequences, it said.
The Commission argued that Britain failed to heed warnings and put in place necessary controls to prevent undervalued goods from entering the single market.
The Court of Justice of the European Union upheld the ruling, but said the Commission would need to recalculate the losses to the EU budget.
M&G jumps on £500m share buyback
Away from Ukraine, M&G is among the biggest risers on the FTSE 100 this morning.
The insurer and asset manager jumped 12pc after announcing plans to return £500m to shareholders through a share buyback programme.
It came as M&G reported net inflows into its funds for the first time since its demerger from Prudential in 2019. Clients added £2bn last year, beating forecasts of £1.5bn.
Rouble swings on West’s split over oil ban
The rouble pared most of its gains after jumping as much as 25pc against the dollar as traders kept a close eye on EU disagreements over a Russian oil ban.
The Russian currency had been on track for its biggest one-day gain since September 1998 before easing back.
The offshore market is the only venue to trade the rouble after the Moscow Exchange temporarily halted trading across all markets.
The currency was last up 4.6pc at 132.9 against the dollar. It had jumped as high as 111.1 after closing at 138.9 on Monday, according to Bloomberg data.
European stocks rebound on stimulus hopes
European stocks have rebounded strongly from one-year lows as investors bet on more stimulus to tackle soaring inflation and stalling economic growth.
The benchmark Stoxx 600 index was up 1.4pc, reversing three days of sharp declines, following reports the EU will issue new joint bonds to help finance energy and defence spending.
The index has been close to a bear market – where stocks drop 20pc below recent highs – as the war sparked a sharp sell-off.
But optimism returned this morning, with banking and insurance stocks leading gains. Germany’s Dax and the French CAC 40 also rebounded.
US fuel prices hit record high
British motorists aren’t the only ones paying record prices for fuel – now the surge has spread to the US, too.
Average pump prices in the US are now $4.173 per gallon – the highest level in records going back to 2000, according to industry body the AAA.
Government data going back to 1990 shows prices have never been higher than they are now. In California, the most expensive US state for drivers, prices have surged to $5.444 a gallon.
The jump in forecourt prices poses a fresh challenge to President Joe Biden, whose attempts to curb inflation and tackle the cost-of-living crisis have had little success so far.
EU to slash dependence on Russian gas by two-thirds this year
The EU has set out plans to cut its dependence on Russian gas imports by two-thirds this year as governments race to cut ties with the Kremlin’s energy sector.
Frans Timmermans, the EU’s green deal commissioner, said the bloc could ramp up imports of liquefied natural gas, speed up the shift to renewable energy sources and improve energy efficiency.
The plan would give the EU independence from Russia’s energy supplies well before 2030 – earlier than previous forecasts.
European gas prices have doubled since Russia invaded Ukraine less than two weeks ago, and Moscow’s threat to cut off supplies to the continent threatens to deepen the crisis even further.
Evraz jumps amid surge in nickel prices
Nickel may be wreaking havoc on the London Metal Exchange, but it’s good news for miners.
Russian steel producer Evraz, whose largest shareholder is Roman Abramovich, rose as much as 35pc – its biggest jump on record and third straight day of gains.
It’s a much-needed boost for the company, whose shares have tumbled since Russia’s invasion of Ukraine and is set to be kicked out of the FTSE 100.
Fellow Russian miner Polymetal rose 6pc, with gold rising to a 19-month high.
Elsewhere, French nickel producer Eramet rose 7pc, while European stainless steel manufacturers Aperam and Acerinox also gained.
FTSE risers and fallers
After starting the day in the red, the FTSE 100 has now swung back into positive territory.
The blue-chip index gained 0.3pc, driven by gains for heavyweight banking and mining stocks.
HSBC, AstraZeneca, Lloyds and Glencore were among the biggest drivers of the increase, while Evraz jumped 25pc on higher commodity prices.
M&G was also one of the top risers, gaining 12pc following strong full-year results.
Shell was the biggest drag on the index, slipping 1.1pc despite higher oil prices, while Rio Tinto also lost ground.
The domestically-focused FTSE 250 jumped 1.2pc, with miner Petropavlovsk gaining 22pc.
Inside the West’s battle to wean itself off Russian oil and gas
As US and European officials mull a ban on Russian oil and gas imports, investors fretting about a global supply crunch have sent prices rocketing.
Critics argue continuing to purchase the Kremlin’s energy exports means being complicit in funding Putin’s war on Ukraine, but a key question is whether Europe’s lights will be able to stay on next winter without Russia.
Governments are battling to figure out how to wean off Russian oil and gas, while keeping their citizens with enough electricity to fuel heaters, bedside lamps and electric cars.
Matt Oliver looks into the crisis.
London Metal Exchange suspends trading in nickel
The London Metal Exchange has suspended trading in nickel.
It comes after prices more than doubled to an unprecedented $100,000 a tonne amid a short squeeze on the exchange.
EU mulls massive bond sale to fund energy and defence
The EU is said to be preparing for a huge joint bond issue designed to finance energy and defence spending as the bloc grapples with the fallout from the war in Ukraine.
Officials are still working out the details on how the debt sales would work and how much money they intend to raise, but the plans could be unveiled later this week, Bloomberg reports.
It comes just a year after the EU launched a €1.8 trillion emergence package backed by joint debt to help member states navigate.
Now, the bloc is in need of major financing to reform its military and energy infrastructure in the face of Russian warmongering.
Britain faces biggest squeeze on incomes since 1970s
UK households are facing the biggest fall in living standards for half a century as Russia’s invasion of Ukraine deepens the cost of living crisis.
That’s according to the Resolution Foundation, which said surging oil and gas prices triggered by the conflict could push inflation above 8pc this spring.
That would slash typical incomes by 4pc in real terms, or around £1,000 in the coming financial year.
The think tank wrote: “This is a scale of fall only previously seen around the recessions of the financial crisis, early 1980s and mid-1970s.”
FTSE 100 opens lower
The FTSE 100 has dropped at the open amid mounting fears that the Ukraine war could push global economies into recession.
The blue-chip index fell 0.5pc to 6,923 points.
Nickel surges past $100,000 in blistering rally
The Ukraine war is driving up prices across a range of commodities, but it’s nickel that’s suffering the most extreme swings.
Nickel prices more than doubled this morning to briefly spike above $100,000 a tonne. That followed a 66pc rise yesterday.
The unprecedented surge in prices comes amid a short squeeze on the LME in which traders with substantial short positions have raced to cover their positions.
To give a sense of how rapidly nickel has jumped, the commodity has risen by about $11,000 a tonne over the last five years. This week alone, it’s jumped by as much as $72,000.
Oil prices keep rising
Oil prices have kept rising after the US moved a step closer to imposing a ban on Russian crude imports.
Key US politicians announced the outline of bipartisan legislation to bar oil imports into the country. That came after the White House said it was in “very active discussions” with allies about an embargo.
However, EU governments are split over the move, and German Chancellor Olaf Scholz yesterday said he would not support a ban.
Still, many traders are opting to shun Russian barrels, keeping prices high. Brent crude rose 3.5pc to around $127 a barrel after hitting its highest since 2008 on Monday.
Moscow has warned western sanctions could drive oil to $300 a barrel. Most analysts dismiss this, however, saying a total ban would push prices as high as $200.
Gas surges on Moscow’s threat
It’s the spectre that’s been haunting energy markets for days, but now the threat has finally been made.
Russia’s top energy official said the country could cut off gas flows to Europe through the existing Nord Stream pipeline – a move that would significantly dent the continent’s supplies.
Alexander Novak, Russia’s deputy prime minister, said the Kremlin had “every right” to do so in response to Germany’s halting of the Nord Stream 2 gas link.
The move pushed European gas prices up by around a third, before they eased off slightly to gains of 18pc.
Gas markets have experienced some of the most volatile trading in history in recent days, with prices more than doubling since the invasion began.
5 things to start your day
1) Inside the West’s battle to wean itself off Russian oil and gas Governments are scrambling for alternatives to Moscow’s supplies as prices keep rocketing
2) Food prices set to jump as cost crisis hits farmers Surging fertiliser prices will feed through to supermarket shelves, insider warns
3) Petrol suppliers race to ditch Russian fuel as prices hit record at the pump 13pc of British oil imports came from country in 2020
4) Rolls-Royce’s plans for mini nuclear power stations take significant step forward Regulators to review small modular reactor design as Britain bids to end reliance on fossil fuels
5) Crispin Odey cashes in on soaring oil and gas prices but warns stagflation is on the way Hedge fund manager warns we are still in the ‘early days’ of energy crisis
What happened overnight
Asian markets mostly fell again on Tuesday as investors worry about the economic impact of the Ukraine war. Tokyo, Hong Kong, Shanghai, Sydney, Seoul, Singapore, Wellington, Taipei and Manila were all down, though Jakarta eked out small gains.
Coming up today
Corporate: Capricorn Energy, ConvaTec Group, Direct Line, Dominos Pizza, Fresnillo, Greggs, IWG, M&G (full-year results); Ashtead Group (interims)
Economics: BRC retail sales (UK), GDP (EU), goods and services trade balance (US)