“Accepting losses is the most single important device to ensure safety of capital” — Gerald Loeb

1. Biden to Sanction Hundreds of Russian Lawmakers — President Biden intends to announce the sanctions on more than 300 members of the Russian State Duma during his trip to Europe, where he will meet with allies from the North Atlantic Treaty Organization to formulate their next steps, according to U.S. officials and internal documents viewed by The Wall Street Journal. The Duma, while far less powerful than the Russian president, has acquired expanded constitutional responsibilities in recent years, particularly regarding the country’s economic affairs. It also serves as a link between various segments of the population and the government, relaying grievances and concerns upward, and distributing state assistance to the public.
2. Russian Stock Market to Partially Reopen — the challenge for Moscow is that the resumption of trading could simply send Russian stocks back into free fall. On Feb. 24, the day when President Vladimir Putin began the assault on Ukraine, the main Russian stock index tumbled 33%. While the index regained a fraction of those losses on Feb. 25—its last day of trading—that was before Western sanctions hammered the ruble and sent the country into an economic crisis.
To limit the fallout, Moscow has turned to some heavy-handed policies. It blocked foreign investors from dumping local stocks—a move that some market participants saw as retaliation for a Western freeze on Russian central bank assets since a big chunk of the Russian market is owned by foreigners. The Russian government ordered its main sovereign-wealth fund to buy billions of dollars worth of shares.
3. Biden Calls for Russia to Be Expelled From G-20 — President Biden said Russia should be expelled from the Group of 20 major economies and pledged the U.S. would take in up to 100,000 refugees fleeing Ukraine as he met Thursday with world leaders to discuss new sanctions and humanitarian aid in response to Moscow’s invasion. With Russian forces facing unexpectedly strong and lethal opposition from Ukrainian forces, Western leaders say they are worried Mr. Putin might resort to using weapons of mass destruction. NATO officials are grappling with the question of what actions by Russia would count as red lines that could prompt more-direct involvement by the alliance. Officials said Russia’s potential use of chemical weapons was part of the discussion among NATO leaders.
4. U.S. to Boost Gas Deliveries to Europe Amid Scramble for New Supplies — The U.S. is ramping up shipments of liquefied natural gas to Europe this year as the continent mounts a world-wide hunt for new supplies to phase out its reliance on Russian energy after the invasion of Ukraine. The globe-spanning effort to wean Europe off Russian energy supplies was at the center of President Biden’s summit with European Union leaders this week in Brussels. The U.S. aims to ship 50 billion cubic meters of LNG to Europe annually through at least 2030, officials said Friday, making up for about a third of the gas the EU receives from Russia. The EU imported a record 22 billion cubic meters of LNG from the U.S. last year. Officials across the continent are racing to sign new contracts with producers in the Middle East and Africa before next winter; EU leaders on Friday also decided to band together when negotiating supply agreements, using the bloc’s collective economic weight to get lower prices.

The week ahead — Economic data from Econoday.com:

“In investing, there is nothing that always works, since the environment is always changing, and investors’ efforts to respond to the environment cause it to change further” ― Howard Marks

1. China’s Covid-19 Surge Shuts Down Plants in Manufacturing Hubs Shenzhen and Changchun — a surge in Covid-19 cases led Chinese manufacturing hubs Shenzhen and Changchun to lock down in recent days, halting production at many electronics and auto factories in the latest threat to the world’s battered supply chain. The government placed the city into lockdown for at least a week and said everyone in the city would have to undergo three rounds of testing after 86 new cases of domestic Covid-19 infections were detected Sunday. Over the past two years, the world’s second-biggest economy has repeatedly locked down entire cities or sections of them, ordering factories to suspend operations as people stay home. Foxconn’s sites in Shenzhen, in southern China, produce some iPhones as well as iPads and computers. The majority of iPhones, however, are made at a factory in central Henan province. Foxconn, formally known as Hon Hai Precision Industry Co., said it would aim to keep up production by shifting work to other plants in China.
Printed circuit-board maker Unimicron Technology Corp. said its Shenzhen subsidiary halted production Monday morning. Unimicron is also a major Apple supplier but doesn’t currently handle Apple-related orders in Shenzhen, according to Apple’s latest supplier list. Unimicron said the subsidiary accounts for less than 3% of its total revenue.
2. Bond Markets Forecast Long Financial Freeze for Russia — Russian government bonds fell below 10 cents on the dollar last week, putting the country’s debt on par with Venezuela, which collapsed into famine five years ago. The valuation is near the low-water mark on bonds set by serial defaulter Argentina, which took 15 years to repay creditors after a bitter legal battle with hedge funds. The country faces a key interest payment on dollar-denominated bonds Wednesday, and Russia’s Finance Ministry has sent investors conflicting messages about whether it intends to give them dollars or rubles. The uncertainty sparked concerns that a payment in rubles could result in a default and speculation about what legal remedies creditors might pursue. Russian bonds had investment-grade ratings and traded around 100 cents on the dollar until the country invaded Ukraine, triggering unprecedented financial sanctions by the U.S. and European countries. The Kremlin responded with measures including a block on bond payments in foreign currencies such as dollars and euros that stoked expectations of a default.
3. Intel Plans $36 Billion in European Chip Plant Investments — Intel Corp. said it would invest $36 billion in chip production and research across Europe, including a new chip-making complex in Germany, to keep pace with surging demand for semiconductors. Chief Executive Pat Gelsinger said Intel had selected the city of Magdeburg, Germany, to put up what would be one of the biggest and most advanced semiconductor manufacturing facilities on the Continent. The company plans a down payment of about $18.6 billion, the equivalent of about €17 billion, on that facility.
4. Fed Raises Interest Rates for First Time Since 2018 — the Fed will raise its benchmark federal-funds rate by a quarter percentage point to a range between 0.25% and 0.5%, the first rate increase since 2018. Officials signaled they expect to lift the rate to nearly 2% by the end of this year—slightly higher than the level that prevailed before the pandemic hit the U.S. economy two years ago, when they slashed rates to near zero. Their median projections show the rate rising to around 2.75% by the end of 2023, which would be the highest since 2008.
The Fed’s post meeting statement hinted at rising concern about inflation that initially appeared last year to be driven by pandemic-related bottlenecks but has since broadened.
5. House Passes Legislation to End Normal Trade Relations With Russia — the House easily passed legislation to end normal trade ties with Russia over its invasion of Ukraine, moving quickly to approve the measure after President Biden announced his support last week. The legislation would strip Russia and Belarus—a country closely aligned with Russia that has been used as a staging ground for its Ukraine invasion—of their most-favored-nation trade status, a step that would result in higher tariff rates on some imports from the countries. To maximize the pressure on Russia and Belarus, the bill would give Mr. Biden the authority to order additional increases in import duties for certain products, pushing them above the rates that would result from simply ending the most-favored-nation, or MFN, status. While the bill doesn’t specify those items, candidates would include non-energy products such as aluminum, wood and wood veneer products, and chemicals including fertilizer, according to Rep. Kevin Brady (R., Texas), a co-sponsor of the bill.

The week ahead — Economic data from Econoday.com:

“Prosperity brings expanded lending, which leads to unwise lending, which produces large losses, which makes lenders stop lending, which ends prosperity, and on and on.”
― Howard Marks

1. Biden Bans Imports of Russian Oil, Natural Gas — President Biden banned imported oil and other energy sources from Russia to punish the country as it intensified its military campaign in Ukraine, a move that will add pressure to already record U.S. gasoline prices and the economic recovery.
The U.S. immediately prohibited new Russian shipments of oil, certain petroleum products, liquefied natural gas and coal under an executive order Mr. Biden signed Tuesday. Washington will give companies 45 days to wind down existing contracts for Russian energy supplies, a senior Biden administration official said. The order also bars new U.S. investment in Russia’s energy sector and blocks Americans from financing foreign companies that invest in the sector.
2. Nickel Market Crisis Sends London Metal Exchange Scrambling to Prevent Damage — financial regulators and Chinese officials rushed to resolve a crisis in London’s nickel market, which remained on ice after an ill-fated trade sparked mammoth price gains and billions of dollars of losses. At the center of the action is Chinese nickel titan Tsingshan Holding Group, the world’s biggest producer of a metal used in stainless steel and electric-vehicle batteries. The company, sitting on $8 billion in trading losses, said Wednesday it had secured enough metal to settle all its loss-making positions, according to a state-run media outlet. The disorder has ramifications for miners, steelmakers and electric-vehicle makers because LME prices are used as a benchmark in the metals industry. Commodity markets were already in turmoil from the war in Ukraine and punishing sanctions, which have cut supply lines and stifled trading of metals, energy and food, essential to the running of the global economy.
3. Inflation Reached 7.9% in February; Consumer Prices Are the Highest in 40 Years — Rising energy, food and services prices pushed already elevated U.S. inflation to a 7.9% annual rate last month—another four-decade high—with oil and commodity market disruptions from the Ukraine crisis expected to add more cost pressures. The consumer-price index, which measures the cost of goods and services across the economy, hasn’t been this high since it was 8.4% in January 1982, when the nation was in recession and trying to tame what had been double-digit inflation. Higher energy prices, including gasoline price increases, helped push up the inflation reading, along with cost gains for groceries, restaurant food, transportation services and apparel, the Labor Department reported.
4. Biden Bans Iconic Russian Imports, Calls for Trade Downgrade — President Joe Biden said he would ban imports of Russian vodka, caviar and diamonds and called on U.S. lawmakers to join Western allies in revoking the country’s preferential trade status following the Ukraine invasion. Downgrading Russia’s trade status “is going to make it harder for Russia to do business with the United States,” Biden said in remarks at the White House, adding that it would “be another crushing blow to the Russian economy.”
The president can’t unilaterally remove what’s known as “permanent normal trade relations” status for Russia because that authority lies with Congress. House Speaker Nancy Pelosi said the House would consider legislation next week to revoke the designation, a move that has support from both Democratic and Republican lawmakers. Biden’s signature on the bill would clear the way for increased import tariffs, and Russia would join Cuba and North Korea as the only countries in the world without preferential trade status in the U.S.

The week ahead — Economic data from Econoday.com:

“There ‘s an old saying in poker that there’s a “fish” in every game, and if you’ve played for an hour without having figured out who the fish is, then it’s you.” — unknown

1. IEA Will Deploy Emergency Oil Stocks to Ease Soaring Prices — the U.S. and other major economies have agreed on a coordinated release of oil stockpiles after Russia’s invasion of Ukraine pushed crude above $100 a barrel. The International Energy Agency, which represents key industrialized consumers, will deploy 60 million barrels from stockpiles around the world. Half of that amount will come from the U.S. Strategic Petroleum Reserve, with the rest from IEA members in Europe and Asia, said a person familiar with the matter, who asked not to be named because the information isn’t public.
That will be the second release from American crude reserves within a few months as soaring fuel costs become a growing political problem for President Joe Biden.
2. As Russia Sanctions Intensify, Several Oligarchs Speak Out Against Ukraine War — in recent days a parade of Russian businessmen burnished their antiwar stances as governments tightened a noose around Kremlin-connected businesses and property. Oligarch Roman Abramovich, who hasn’t been sanctioned, said that he was helping Ukraine negotiate peace with Russia. Oleg Tinkov, the billionaire founder of Russia’s Tinkoff Bank, a unit of TCS Group Holding PLC, highlighted the work his foundation does to help children and his desire for no war. Mr. Tinkov also hasn’t been sanctioned. Oleg Deripaska, a raw-materials magnate who was previously sanctioned in the U.S., wrote on social media Sunday that peace “is very important.” The European Union said Monday night that it added 26 prominent Russians officials and businessmen to its sanctions list, freezing their assets and imposing travel bans. The U.K. is expected to sanction more oligarchs in the coming days. Even Monaco, famed for its generous tax rules and status as a playground for the well-heeled, said it was clamping down on sanctioned Russians.
3. Russia Keeps Stock Market Closed in Longest Pause Since 1998 — Russia will keep local stock trading closed for a third day as its wealth fund prepares to deploy billions of dollars to buy the country’s battered stocks following the invasion of Ukraine. The three-day shuttering of stock trading on the Moscow bourse is its longest closure for extraordinary circumstances since October 1998, according to the exchange. The halt came after the U.S. and Europe imposed harsher sanctions on Russia over the war in Ukraine, sending the country’s assets plunging. As much as half of Russia’s international reserves may have been frozen abroad as punishment for Putin’s invasion of Ukraine. In response, the central bank has introduced capital controls and banned foreigners from selling securities locally, effectively shutting the exits for investors. European Union ambassadors have also agreed to exclude seven Russian banks from the SWIFT financial-messaging system.
4. Fed’s Powell Says Ukraine War Creates Risks of Higher Inflation — Federal Reserve Chairman Jerome Powell said that Russia’s invasion of Ukraine was likely to push up inflation, a setback to central bank expectations that price pressures would diminish in the coming months. Because of Russia’s role in global energy and other commodity markets, “we’re going to see upward pressure on inflation at least for a while,” Mr. Powell told the Senate Banking Committee on Thursday. Consumer prices in January rose 6.1% from a year earlier, according to the Fed’s preferred gauge. Excluding volatile food and energy categories, so-called core inflation rose 5.2%, close to a 40-year high.
5. Strong Hiring, Low Unemployment Point to Economy Making Post-Pandemic Pivot — employers added 678,000 workers to their payrolls in February, the biggest gain in seven months, the Labor Department said Friday. The jobless rate fell to 3.8% from 4.0% a month earlier, edging closer to the 50-year low of 3.5% hit just before the pandemic. Hotels, restaurants, amusement parks and other hospitality industries led the way in hiring as firms sought to accommodate a growing number of vacationers, convention attendees and business travelers. Big states and cities in recent days have lifted some of the remaining Covid restrictions, which could further boost business and hiring. However, big threats loom, including a sharp run-up in oil prices that could crimp household spending and ultimately nick the economic and labor market recovery, economists said.
6. Bond Market Warning — from Bloomberg, the specter of stagflation, a rare combination of surging prices in a constricting economy, is showing in the bond market. Ten-year inflation breakevens just increased to the highest level since 2005, while the yield curve — the spread of 10- over two-year Treasury yields — narrowed to levels not seen since the pandemic recession. History shows an outright inversion, as happened in 2019, would signal an imminent contraction.

The week ahead — Economic data from Econoday.com: