Fitch predicted that the pain of escalating sanctions raised the proospect of at least a ‘selective non-payment’ of its sovereign debt obligations, after the US and the UK both announced bans on Russian oil imports on Tuesday.
Russians are already feeling the economic pain of the crisis. Inflation jumped by over 2% in the first week of the Ukraine war, with consumer prices now 10% higher than a year ago.
With the economy heading into a deep recession, there is clearly much more trouble ahead, with the rouble weakening again this morning.
European stock markets have staged a dramatic rebound today, in their strongest recovery in two years. Germany’s DAX led the way with an 8% gain, as anxiety over the crisis appeared to ease.
In London, banks, travel companies and Russian miners all had a strong day, recovering some of the major losses in the last two weeks.
Oil prices have tumbled, with crude down around 13% tonight on optimism that Opec might boost production. The move has calmed some concerns about inflationary pressures hitting the global economy.
But analysts have cautioned that the markets may be too optimistic, given the air strike on a Children’s hospital in Mariupol today, and Western fears that Vladimir Putin could use chemical weapons on Kyiv.
The EU has added more names to its sanctions list ,including Russian Formula One driver Nikita Mazepin and Russian business leaders.
While the UK government unveiled new aviation sanctions against Russia, toughening up a ban on Russian planes flying or landing in the UK alongside powers to detain any Russian aircraft in the UK.
The business backlash against Russia gathered more pace, with the owner of KFC and Pizza Hut has joined the ranks of Western brands suspending its operations in Russia.
Kentucky-based Yum! Brands is suspending 70 KFC company-owned restaurants in Russia and finalising an agreement to suspend all 50 Pizza Hut outlets in partnership with its master franchisee.
Mothercare, Heineken and Universal Music Group also announced they were halting operations in Russia.
Tobacco firm Imperial Brands also announced it will halt operations in Russia, but British American Tobacco will continue selling cigarettes in Russia:
While some directors are quitting the boards of Russian firms, others are holding firm:
Fertiliser giant Yara has temporarily cut output at two European plants, due to soaring energy prices.
With fears of food shortages already rising, Irish dairy and beef farmers are being urged to start growing crops. Agriculture ministers from G7 countries including Britain’s George Eustice will meet on Friday to discuss grain shortages and food price volatility amid the war in Ukraine.
Elsewhere, the US labour market remains tight with 11.3m job vacancies at American companies in January.
UK households are the gloomist about financial conditions in a decade, as inflation squeezes incomes.