Oil keeping higher

The United States and the European Union have decided to exclude certain Russian banks from the international Swift banking payment system. Other sanctions are aimed directly at the Russian president and his foreign minister. They have also banned all transactions with the Russian central bank. In addition, exports of technology products to Russia will be severely restricted in order to weaken its economic development in key sectors. Initially, it is the Russian currency that is paying the price, losing more than 30% against the dollar. Now USD/RUB is around 110 with a wide bid/ask spread and weak liquidity.

CHF appreciates further. EUR/CHF continues to slide further and the 1.0300 level has been tested several times and finally given away by hitting a new low at 1.019. Similar movement on USD/CHF which is again below 0.9200, not far from the low since the “Russian invasion” at 0.9150. EUR/USD is moving around 1.1100.

The Swiss government broke with a long-entrenched tradition of neutrality and agreed to enforce European Union sanctions against Russian companies and individuals.

Oil prices continued to go up on Wednesday, with Brent crude oil exceeding $110 a barrel for the first time since 2014. Investors fear a sharp decline in oil exports from Russia due to international sanctions. Russia is the world’s second largest crude oil exporter and accounts for more than 40% of the European Union’s annual natural gas imports. But the International Energy Agency announced on Tuesday that its member countries would release 60 million barrels from their emergency reserves to stabilise the market.

Euro area: easing of health measures economic activity rebounded strongly in February. The composite purchasing managers’ index  (PMI, Markit) stood at 55.8 points, up from 52.3 in January.  The pace of activity accelerated particularly in the services sector, which benefited from the the lifting of restrictions. Over a year in January, the price index continued to rise, reaching 5.1% compared with 5.0% in the previous month, still supported by the strong energy prices over the period.

US bonds rose again yesterday as government bonds played their role as safe haven assets. The US 2-year yield fell sharply to 1.34%, dropping 10 bps on the ground, and the 10-year yield fell 9.5 bps to 1.73%. In Europe, the German 10-year yield fell by 20.7 bps to -0.072%, back into negative territory for the first time since January. Market seems convinced that given the severe impact of the war on the region’s economy, the ECB will be forced to postpone its monetary tightening.

The major financial markets fell heavily last week. European markets, which are more exposed to Russia, were particularly hard hit on Tuesday.  Euro-Stoxx-50 at 3765.85. (-4.04%).

The SMI held up better due to its more defensive characteristics. Financial stocks, especially the big banks and reinsurance, were among the most affected. SMI 11862 (-1.04%).