Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The International Monetary Fund’s executive board has approved $1.4bn in emergency financing for Ukraine, and predicted a “deep recession” in Ukraine this year. In a statement, it expressed its “strong support for the Ukrainian people”.
IMF managing director Kristalina Georgieva said once the war is over, the country is likely to need additional “large support”.
The Russian military invasion of Ukraine has been responsible for a massive humanitarian and economic crisis.
Financing needs are large, urgent, and could rises significantly as the war continues.
Vladyslav Rashkovan, Ukraine’s alternate executive director, gave an emotional speech at the board meeting about the devastation caused by the war and the impact on Ukrainians, Reuters reported. His remarks were met with spontaneous applause, a rare event at these meetings.
Russian executive director Aleksei Mozhin, who is the board’s most senior member and serves as its honorary dean, spoke only briefly, saying: “I pray for peace.”
The Ukrainian authorities have cancelled the previous stand-by arrangement and expressed their desire to work with the IMF to design an economic programme aimed at rehabilitation and growth, when conditions permit.
The World Bank’s executive board approved a $723m package of loans and grants for Ukraine on Tuesday.
Meanwhile, US House lawmakers voted to rush through a $13.6bn aid package that would increase military and humanitarian support to Ukraine and its European allies. The aid includes $6.5bn for the US costs of sending troops and weapons to eastern Europe and equipping allied forces there, and $6.8bn to care for refugees and provide economic support to allies. Senate approval is expected within days. The House also passed a bill banning Russia oil imports.
Asian stocks joined yesterday’s European and US market rally after recent heavy losses, with markets in Europe seeing their biggest one-day gain since March 2020, with the DAX standing out, while US markets rose at their fastest rate since November 2020. Japan’s Nikkei closed nearly 4% higher while South Korea’s Kospi is 2.2% ahead and Hong Kong’s Hang Seng rose 0.5%.
Oil prices also dropped sharply yesterday after an aide to Ukraine president Zelenskiy said the country is open to Russia’s demand of neutrality, assuming its gets cast-iron security guarantees. Today, Brent crude has risen about 3% to $114.58 a barrel while US light crude is 1.7% ahead at $110.6 a barrel.
European stock markets are expected to open lower after yesterday’s rebound. While Ukraine will undoubtedly remain the focus, markets will also be eyeing today’s European Central Bank rate decision at lunchtime, as well as US inflation for February, where we are expecting an annual rate of 7.9%, up from 7.5% the month before.
Joining the growing number of companies that are pausing business in Russia, Japan’s Hitachi said today it would suspend operations there – but stopped short of linking the decision to pressure from Ukraine. Two days ao, the Ukrainian vice prime minister Mykhailo Fedorov on Twitter urged the conglomerate to take action, with an image of his letter to Hitachi boss Toshiaki Higashihara attached.
The company, which produces and sells construction machinery in Russia, said it would stop exports and cease most operations in the country with the exception of vital electrical power facilities.
A spokesperson told Reuters:
We took multiple factors including the supply chain situation into account when we came to the decision.
The Russian government plans to order local airlines to pay for leased aircraft in roubles and bar them from returning planes to foreign companies if leases are cancelled, according to a draft law published today. Western sanctions have forced Russian airlines to cancel international flights.
The rouble has dropped sharply in value since Russia’s invasion of Ukraine.
The Agenda
- 12.45pm GMT: European Central Bank interest rate decision
- 1.30pm GMT: ECB Press conference
- 1.30pm GMT: US inflation for February (forecast: 7.9%)
- 2.30pm GMT: ECB Macroeconomic projections