|
Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | |  | | By Victoria Guida and Aubree Eliza Weaver | Editor’s Note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our s each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro.
| | | MARKETS SHOW SOME ENERGY — President Joe Biden on Thursday seemed to temporarily ease one of the market’s biggest fears about Russia’s invasion of Ukraine, making clear that the U.S. wasn’t looking to sanction the Russian energy sector — the country’s strongest tie to the global economy. Stocks closed in the green, but the anxiety is far from over. Investors are reacting mainly to concern about what the escalating war could mean for oil against the backdrop of already high inflation. The threat of soaring oil prices could spark further price jumps and, at worst, even tip the U.S. into a recession, as your guest MM host reported. Our Ben Lefebvre writes: “U.S. benchmark crude oil prices rose $7 a barrel to just above $100 at 3 a.m. Thursday, then fell back as reports of major supply problems failed to emerge, and closed at $93. But given that shooting has started, the market is pricing in the possibility that oil infrastructure will take damage, intentionally or otherwise.” In fact, U.S. sanctions targeting short-term loans to Gazprom may actually prevent the state-controlled gas company from shutting its taps to starve its European customers of energy, Ben says. In a nutshell, the move prevents Gazprom from living off the corporate version of credit cards. “It means they have to keep selling if they want revenue,” Randy Bell, director of the Atlantic Council’s Global Energy Center, tells Ben. “In the medium term, there's an interesting question about what it does to its viability as a producer if it needs debt financing” to invest in new operations. Energy companies might not be in the crosshairs, but the U.S. did move to curtail Russia’s access to high-end technologies, our Steven Overly reports. “Key trading partners will join the U.S. in imposing export controls that Biden estimated would cut off more than half of Russia’s high-tech imports. That will deprive Russia’s defense, aerospace and maritime industries of equipment and software that are necessary to compete globally, he said.” Biden also targeted the two largest Russian banks, cutting off Sberbank, the biggest, from the U.S. financial system, which will in turn cut off many of its customers, including Russian corporations, from easy access to U.S. dollars. Essentially, the moves will choke off a lot of funding for the Russian economy , including Wednesday’s move that blocks the Russian government from getting Western financing for its debt. The big question is how much damage this will do, including how much it crimps economic activity by Russian citizens. “This really puts the government in a position where it has to rely on domestic financing,” said Rachel Ziemba, adjunct senior fellow at the Center for a New American Security. “The banks might be more involved in funding the key government projects, so either they choose even lower levels of growth, or the banks might be less willing to lend to the population because they’re supporting the government.” IT’S FRIDAY — Kate Davidson will be back in your inbox next week! Send any tips to her at kdavidson@politico.com or @KateDavidson, and to Aubree Eliza Weaver at aweaver@politico.com or @AubreeEWeaver. And you can reach me at vguida@politico.com.
| | | | BECOME A GLOBAL INSIDER: The world is more connected than ever. It has never been more essential to identify, unpack and analyze important news, trends and decisions shaping our future — and we’ve got you covered! Every Monday, Wednesday and Friday, Global Insider author Ryan Heath navigates the global news maze and connects you to power players and events changing our world. Don’t miss out on this influential global community. Subscribe now. | | | | | | | | THE AG IMPACT OF A RUSSIA-UKRAINE WAR — With Russia’s invasion of Ukraine becoming a reality this week, lawmakers worry that disruptions to Ukrainian grain exports that help feed large portions of the developing world could drive up global food prices and spark social unrest, report our Doug Palmer, Meredith Lee and Ximena Bustillo. “We’re quite concerned that it would be a huge disruption to the global supply chain,” a senior Senate Republican aide tells them. “Since Ukraine produces so much wheat and the World Food Program buys so much, it would be pretty catastrophic.” More from Meredith and Ximena: “As U.S. officials had feared, Ukraine — known as the ‘breadbasket of Europe’ for its sprawling wheatfields — closed its ports on Thursday amid the invasion. The conflict is already driving up prices for grains from the U.S., which is also a major exporter. Lower estimated yields from South America are also helping to push up prices. “Wheat futures prices at the Chicago Board of Trade, the global benchmark, surged 6 percent earlier this week, to about $9.34 a bushel, the highest in nine years. Wheat futures are up 10 percent since the start of the year. USDA Chief Economist Seth Meyer warned during the department’s Outlook Forum on Thursday that the conflict could have global economic and trade implications. “Together, the two countries account for almost a quarter of global grain exports,” Meyer said. MESTER STILL SEES MARCH HIKE AS APPROPRIATE — Bloomberg’s Olivia Rockeman: “Federal Reserve Bank of Cleveland President Loretta Mester said that barring an ‘unexpected turn in the economy,’ she still supports kicking off a series of interest-rate hikes in March, and starting to reduce the size of the central bank’s balance sheet soon. “‘There are risks and uncertainty around the outlook, including those engendered by the geopolitical events unfolding today,’ Mester said in prepared remarks for an event Thursday hosted by Lyons Companies and the University of Delaware. Asked after the speech how the Ukraine crisis will affect policy decisions, Mester said, ‘I don’t think it changes the need of the Fed to remove accommodation from the emergency levels’ it currently has.” U.S. SLIGHTLY REVISES UP ITS GDP ESTIMATE FOR Q4 — AP’s Paul Wiseman: “The U.S. economy ended 2021 by expanding at a brisk 7 percentannual pace from October through December, the government reported Thursday in a slight upgrade from its earlier estimate as businesses stepped up their restocking of supplies. For all of 2021, the nation’s gross domestic product — its total output of goods and services — jumped by 5.7%, the fastest calendar-year growth since a 7.2 percent surge in 1984 in the aftermath of a brutal recession.” CITI SPIKES OVERDRAFT FEES — CNN’s Matt Egan: “Citigroup is saying goodbye to overdraft fees, making it the biggest US bank to pledge to eliminate the controversial charges. “By this summer, Citi plans to get rid of overdraft fees, non-sufficient funds fees and overdraft protection fees, the bank exclusively told CNN on Thursday.” JUST IN: PUBLIC CITIZEN LAUNCHES FED AD BUY — Per release: “Public Citizen today launched a multi-fronted campaign, including a six-figure digital ad effort, mobile billboards, and a call-in campaign to pressure key Republican senators to allow the committee to proceed with a vote on President Biden’s nominees to the Federal Reserve Board when the Senate reconvenes next week.” The ad targets Sens. Mike Rounds (R-S.D.), Thom Tillis (R-N.C.), Jerry Moran (R-Kan.) and Mike Crapo (R-Idaho).
| | | Some crypto updates from our Sam Sutton: ANYWAY YOU CAN — Some Ukrainian NGOs are raising money to support the resistance through crypto crowdfunding platforms. From CNBC’s MacKenzie Sigalos "New data from blockchain analytics firm Elliptic shows that over a 12-hour window on Thursday, nearly $400,000 in bitcoin was donated to Come Back Alive, a Ukrainian nongovernmental organization providing support to the armed forces." CRYPTO TANKS, REBOUNDS FOLLOWING INVASION — Crypto markets plummeted on the news that Russia had invaded Ukraine late Wednesday, erasing roughly $200 billion from its $1.75 trillion market cap overnight. Prices of popular digital assets like Bitcoin and Ether rebounded somewhat over the course of the day on Thursday — mirroring similar swings in equity markets. LOBBY UP — The crypto data firm Chainalysis has hired the lobbying firm T Cap Solutions, led by former Commodity Futures Trading Commission Chief of Staff Charlie Thornton, to build its presence in Washington. In an email, Thornton noted that the firm’s tech can be useful to law enforcement agencies investigating cybercrime.
| | | | STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president’s ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today. | | | | | | | | SEC PROBES TRADING BY ELON MUSK, BROTHER — WSJ’s Dave Michaels: “The Securities and Exchange Commission is investigating whether recent stock sales by Tesla Inc. Chief Executive Elon Musk and his brother, Kimbal Musk, violated insider-trading rules, according to people familiar with the matter. The SEC’s investigation began last year after Kimbal Musk sold shares of Tesla valued at $108 million, one day before the Tesla chief polled Twitter users asking whether he should unload 10 percent of his stake in the electric-car maker and pledging to abide by the vote’s results.” U.S. BANKS ARE PREPARED FOR RUSSIA SANCTIONS, BUT CONCERNS GROW ABOUT HACKS — WSJ’s Mengqi Sun and Richard Vandeford: “Several major financial institutions declined to comment publicly on their plans in light of sanctions, but retaliatory hacks are a major worry, several individuals connected to the U.S. banking industry said. One of the people added that Biden administration officials have told banks they intend to share intelligence among multiple U.S. agencies in order to mount a quick response, but the officials haven’t spelled out what any response might be.” TREASURY: MOST COVID RENTAL AID WENT TO LOW-INCOME RESIDENTS — AP’s Michael Casey and Fatima Hussein: “More than 80 percentof the billions of dollars in federal rental assistance aimed at keeping families in their homes during the pandemic went to low-income tenants, the Treasury Department said Thursday. … In the fourth quarter of 2021, Treasury found that more than 40 percent of tenants getting help were Black and two-thirds of recipients were female-headed households. The data was consistent with what Treasury saw throughout the year.” MORGAN STANLEY DISCLOSES PROBE INTO ITS BLOCK TRADING BUSINESS — Bloomberg’s Sridhar Natarajan and Katherine Burton: “Morgan Stanley said U.S. regulators and prosecutors are investigating various aspects of its block-trading business, acknowledging the firm itself is under scrutiny as authorities dig into how Wall Street bankers and money managers carry out stock transactions big enough to move prices. “The New York-based investment bank has been responding since August to requests for information from the U.S. Attorney’s Office for the Southern District of New York, the company said in a regulatory filing Thursday. It’s also been fielding requests from the U.S. Securities and Exchange Commission since June 2019, the firm said, noting that it’s cooperating.” FANNIE MAE DELAYS MORTGAGE-BACKED BOND SALE AFTER VOLATILE DAY — Bloomberg’s Adam Tempkin and Carmen Arroyo: “Fannie Mae delayed a scheduled residential mortgage bond on Thursday due to market volatility spurred by Russia’s invasion of Ukraine, according to people with knowledge of the matter. The government sponsored enterprise had kicked off marketing on the deal but postponed a key step in selling the debt, setting initial price guidance, said the people, who asked not to be identified as the transaction is private. The transaction is part of the GSE’s Connecticut Avenue Securities programmatic series of RMBS. Fannie Mae will monitor the market in coming days to determine appropriate next steps, the people said.” | | | | Follow us on Twitter | | | | Follow us | | | | |  |
