Fed expected to raise interest rates for first time since 2018, markets rise on Ukraine hopes – as it happened

So, to recap: global stock markets are rallying, initially on Beijing promising more economic stimulus, as well as hopes for peace talks between Ukraine and Russia. The recovery gathered steam after news of a tentative 15-point peace plan including a ceasefire and Russian withdrawal if Kyiv declares neutrality and accepts limits on its armed forces, reported by the FT.

Oil prices have fallen back, with Brent crude below $100 a barrel following earlier gains. It is down 1.4% at $98.48 a barrel while US light crude has dropped 0.7% to $95.81 a barrel.

Later today, the US Federal Reserve is expected to raise interest rates for the first time since 2018 as it struggles with soaring US inflation, the impact of the war in Ukraine, and the continuing coronavirus crisis.

Russia faced a crucial bond payment on Wednesday that could lead to the sanctions-racked country defaulting for the first time since 1998, and its first major international debt default since the Bolshevik revolution a century ago.

The drinks maker Fever-Tree and the owner of the Wagamama and Frankie & Benny’s restaurant chains have warned of dramatic cost increases as the price of commodities and gas and electricity soars and the war in Ukraine adds pressure to their businesses.

Thank you for reading. We’ll be back tomorrow. Take care – JK

The markets are soaring, on news of a 15-point plan drawn up Ukrainian and Russian negotiators, reported by the Financial Times. It said:

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}Ukraine and Russia have made significant progress on a tentative 15-point peace plan including a ceasefire and Russian withdrawal if Kyiv declares neutrality and accepts limits on its armed forces, according to three people involved in the talks. Highlight text

The proposed deal, which Ukrainian and Russian negotiators discussed in full for the first time on Monday, would involve Kyiv renouncing its ambitions to join Nato and promising not to host foreign military bases or weaponry in exchange for protection from allies such as the US, UK and Turkey, the people said.

The nature of western guarantees for Ukrainian security — and their acceptability to Moscow — could yet prove to be a big obstacle to any deal, as could the status of Ukrainian territories seized by Russia and its proxies in 2014. A 1994 agreement underpinning Ukrainian security failed to prevent Russian aggression against its neighbour.

The FTSE 100 index has jumped more than 120 points, or 1.7%, to 7,297. The German, French and Italian markets are all more than 3% ahead.

On Wall Street, the Dow Jones is 1.1% ahead while the S&P 500 has gained 1.6% and the Nasdaq rose 2.7%.

My colleague Graeme Wearden has looked at Russia’s bond payments due today.

Russia faced a crucial bond payment on Wednesday that could lead to the sanctions-racked country defaulting for the first time since 1998, and its first major international debt default since the Bolshevik revolution a century ago.

Moscow was due to make $117m (£89.4m) interest payments, or coupons, to investors holding two dollar-denominated bonds. But with much of its foreign exchange reserves frozen by international sanctions, it may be unable to pay.

That could pave the way to a historic default, after a 30-day grace period, that would add to the intense pressure on the Russian economy.

“The onset of war, western sanctions, the exodus of international conglomerates and freefalling investor confidence have led to Russia’s downfall with its currency, financial system, and the wider economy in a state of ruin,” said Victoria Scholar, head of investment at Interactive Investor. “Although Russia technically has a 30-day grace period before an official default, a full-blown collapse is almost inevitable.”

The Russian finance minister, Anton Siluanov, has accused the west of trying to engineer an “artificial default” by freezing access to the Bank of Russia’s foreign exchange reserves held by other major central banks.

Moscow has said it could pay international bondholders in roubles, if it were unable to service its debts in the currencies they were issued in. It argued that this would mean it was meeting the payment.

“Is that a default? From Russia’s point of view, we are fulfilling our obligations,” Siluanov said on state TV on Monday.

Liz Truss, the UK’s foreign secretary, confirmed that the UK had paid the £400m owed to Iran - but he said the payment had been “ring-fenced solely for the purchase of humanitarian goods”.

You can read more about the return of Nazanin Zaghari-Ratcliffe and Anoosheh Ashoori from Iran, and the release of Morad Tahbaz from jail, on this live blog:

Canada’s annual inflation rate rose to 5.7% in February, the highest since August 1991.

In some better news for the global inflation outlook, wheat prices in Chicago have fallen back along with corn prices, while soybeans rose. Investors have been encouraged by the peace talks between Ukraine and Russia, while rain forecast in the US plains eased concerns over parched crops.

The most-active what contract on the Chicago Board of Trade ended the overnight session 2.5% lower at $11.25-1/4 a bushel, after rising more than 5% the previous day.

A Mumbai-based grains dealer at a global trading firm told Reuters:

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}Ukraine and Russia are holding a good amount of grains stocks. As soon as war ends, this stockpile will be available for shipping.

US retail sales rose 0.3% in February compared with the month before, a tad less than the 0.4% increase forecast by economists. January’s growth was revised to 4.9%, according to the US Census Bureau.

Joseph Brusuelas, RSM US chief economist, tweeted:

Brian Wesbury, chief economist at First Trust Portfolios, tweeted:

Here’s a round-up of today’s other news.

The drinks maker Fever-Tree and the owner of the Wagamama and Frankie & Benny’s restaurant chains have warned of dramatic cost increases as the price of commodities and gas and electricity soars and the war in Ukraine adds pressure to their businesses.

Fever-Tree has lowered its profit guidance, blaming a “dramatic increase” in commodity prices after Russia’s invasion of Ukraine. The company, which had forecast adjusted profits of £69m to £72m this year, has downgraded its outlook to between £63m and £69m.

The Federal Reserve is expected to raise interest rates for the first time since 2018 as it struggles with soaring US inflation, the impact of the war in Ukraine, and the continuing coronavirus crisis.

The Fed has a dual mandate – to maximize employment and keep prices under control. The job market and the wider economy have made an impressive recovery from the lows of the pandemic, thanks in part to Fed rate cuts and a massive stimulus program, but prices have increased by 7.9% in the year through February – the highest rate of inflation in 40 years.

The Church of England is pressuring the French energy giant TotalEnergies over its decision not to cut ties with Russia after Vladimir Putin’s invasion of Ukraine.

The Church’s pensions board and the manager of its investment fund said they would reconsider their shareholding in the company.

At least 18 private jets or helicopters linked to Russia have been struck from the Isle of Man’s aircraft register, as the offshore authorities enforce sanctions brought in by the EU and UK.

Three aircraft have been removed in the last week, including a helicopter and private jets believed to be ultimately owned by Roman Abramovich, Oleg Tinkov – an oligarch not subject to direct sanctions – and Dmitry Mazepin.

The UK could eliminate all need for imports of Russian gas this year through a combination of energy efficiency, expanding renewable power generation and a campaign to help people change their behaviour, research has found.

Information campaigns played a strong role in changing people’s behaviour during the Covid-19 pandemic. Many people are unaware of the savings they could make in energy use through small changes that make no difference to their comfort but can cut bills substantially.

Russian oligarchs will no longer have access to baubles such as the cars, artworks and designer handbags sold by British companies, after the government blocked exports worth hundreds of millions of pounds.

Last year, UK firms in total sold £2.6bn worth of goods to Russia, the biggest slice of which was cars, at around £400m, as wealthy Russians splashed out on prestigious marques such as Aston Martin, Bentley and Rolls-Royce.

In other insurance news, the boss of the UK insurer Legal & General, Nigel Wilson, was paid £4.5m last year, more than twice the £2.1m he received in 2020.

The insurance market Lloyd’s of London has issued the largest ever fine, of more than £1m, in its 336-year history after a member firm mishandled a bullying and harassment case and hosted an inappropriate “Boys Night Out” event for staff, our banking correspondent Kalyeena Makortoff reports.

Lloyd’s announced today that it had issued three charges against Atrium Underwriters in relation to “serious failures” by the firm and its senior managers, which came to a head in 2018.

One of the charges related “a systematic campaign of bullying” by one male staffer against against a junior employee, that was well known within the firm, but failed to result in any disciplinary measures against the offending worker.

The firm was also charged for “sanctioning and tolerating” an annual “Boys’ Night Out” where some male employees – including two senior executives – took part in inappropriate initiation games, heavy drinking, and sexual comments about female colleagues that Lloyds said were both “discriminatory and harassing” to members of staff. “Some of this conduct was led, participated in and condoned, by the two senior managers in attendance,” it said.

John Neal, Lloyd’s chief executive, said:

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}We are deeply disappointed by the behaviour highlighted by this case, and I want to be clear that discrimination, harassment and bullying have no place at Lloyd’s. The robust action we have taken today, including the largest fine ever imposed by the Lloyd’s Enforcement Board, shows that we will not tolerate poor conduct in our market. Lloyd’s expects all participants in the market to meet the highest standards of professionalism, and we are continuing to use our powers to intervene when needed.

Christopher Stooke, Atrium’s chairman, said the company fully accepted the ruling and recognised it must ensure such behaviour “is never allowed to happen again”.

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}With deep regret, it is clear that Atrium failed to live up to its values and serious errors were made when handling these matters. We are sorry for the hurt that this caused and how difficult this been for those affected.

We have moved quickly to address and learn from these past failings and update our policies and procedures to ensure the highest standards.

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.

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.

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:

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}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.

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:

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}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 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.

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}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.

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:

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}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.

The Agenda

• 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