March 24, 2022

Markets Today: Getting ready to Ruble

Russia intends to make ‘unfriendly’ countries pay for gas in rubles.

Today’s podcast

Overview: Holiday

  • Markets bucked the recent trends overnight
  • Equities were lower, the S&P500 -1.1%, Nasdaq -1.2%
  • Yields pulled back from recent gains, US 10yr -8.4pbs to 2.30%
  • AUD 0.4% at 0.7497 having pushed above 75c
  • UK CPI higher than expected at 0.8% m/m
  • Russia intends to make ‘unfriendly’ countries pay for gas in rubles
  • Coming up: US and European PMIs, Fed Speakers (Kashkari, Evans, Waller)

“You need a holiday, come see me, I know you’re tired of the same old scenery” – Dizzee Rascal


Markets overnight took a pause from the bond sell off and equity market gains of recent days . The S&P 500 fell 1.1%, following gains of greater than 1% in 5 out of the previous 6 sessions. Yields were also lower, giving back some if their recent gains. The US 2yr yield 6bps lower to 2.1105 and 10yr yields are off 8bps at 2.30%. That’s against a reasonably quiet backdrop, though Russia-Ukraine headlines again rattled energy markets with Russia indicating it would insist in payment for Natural gas in rubles from ‘unfriendly’ countries and the US and EU neared new sanctions. UK February CPI came in hotter than expectations at 0.8% m/m (0.6% expected), even before the new round of fuel and energy price pressures in the pipeline in coming months. Eurozone consumer sentiment slumped to -18.7, more than expected and its lowest level since the early months of the pandemic

In currency markets, higher commodity prices helped the AUD up 0.4% against the dollar . The AUD briefly pushed above 75c for the first time since 2 November last year, reaching 0.7507 this morning, but is back to 0.7497. GBP weakened, losing 0.4%, while the euro slipped 0.2% to 1.0964. The dollar edged 0.1% higher on the DXY, and rose 0.3% against the yen; the yen remaining soft despite some pullback in global rates. Equity markets were generally lower. The S&P500 was off 1.1%. Falls were led by financials and healthcare, while energy stocks provided some offset. The Nasdaq was down 1.2%.

On Russia-Ukraine developments, European Union and NATO leaders are set to gather in Brussels on Thursday to discuss further sanctions, while the WSJ reports that Biden is preparing to announce sanctions on more than 300 members of the Russian State Duma, planned to be in coordination with allies. Russian President Putin ordered the central bank to develop a mechanism to make ruble payments for gas within a week as he indicated that he would insist on payments in rubles from ‘unfriendly’ nations including the US, UK and members of the EU. Italy has indicated it is ‘not inclined’ to pay in rubles and Germany noted that the move would breach its contracts. European natural gas surged almost 30% on the news but has since fallen back to be up 11%. Brent oil was up 5.4% to $121.69 also supported by news of Black Sea supply disruptions and a drop in US inventories.

The pull-back in the rates sell-off overnight came despite no change in tune from Fed speakers about the need push ahead with hikes to contain inflation pressures and return to price stability. San Francisco President Daly noted “We’re prepared to do whatever it takes to ensure that we get price stability, which clearly no one thinks we have right now” adding that “everything was on the table ” at the May meeting, including 50bp hike and balance sheet reduction. Cleveland’s Mester indicated a need for some 50bp hikes this year, saying in a call with reporters “I don’t want to presuppose every meeting from here to July, but I do think we need to be more aggressive earlier rather than later.” Mester earlier in the week confirmed she saw was on the hawkish side of FOMC participants, seeing the need to get the fed funds rate to 2.5% by the end of the year. Bullard was speaking in the last hour or so and repeated calls for faster rate hikes.

UK CPI for February printed 0.8% m/m for 6.2% y/y, above the consensus estimate for a 0.6% q/q rise. The core measure was also up 0.8% m/m for 5.2% y/y. The upside surprise in the February numbers comes ahead of further energy and petrol price pressures in coming months. Chancellor Sunak delivered the Spring Statement that contained budget measures aimed at cost of living pressure including a 6bn pound tax cut and a cut to fuel excise. The Office for Budget Responsibility said net tax cuts announced on Wednesday offset only a sixth of the tax rises introduced since Sunak became chancellor in February 2020 and raised its forecast for inflation to hit a 40 year high of 8.7% y/y this year.

Coming Up

  • Nothing on the Australian Calendar today as the relatively quiet week continues.
  • Preliminary PMIs the main data of note tonight. The Eurozone Manufacturing PMI is seen edging lower to 56 from 58.2. Something similar expected for the US number, the Bloomberg Survey looking for 56.6 from 57.3. US Durable goods orders are also released
  • While the data flow is fairly quiet, a raft of Central Bank speakers are on the agenda overnight. The Fed’s Kaskari and Evans are speaking separately on the economic outlook, Waller on the housing market, and Bostic appears in a moderated Q&A. The ECB’s Elderson speaks overnight, followed by Schnabel early tomorrow morning. The BoE’s Mann appears as a panellist at the Institute of International Finance event ‘The Costs, Risks, and Rewards of the Net-Zero Transition’.

Market Prices

Read our NAB Markets Research disclaimer

For further FX, Interest rate and Commodities information visit