By David Lawder

DENVER -U.S. Treasury Secretary Janet Yellen said on Friday the U.S. economy is better prepared to weather economic turbulence from Russia’s invasion of Ukraine because of the $1.9 trillion COVID-19 aid package passed a year ago.

Yellen, speaking at a Denver social services agency on the first anniversary of the American Rescue Plan, (ARP) said the United States is now much better able to withstand unforeseen crises — such as the war in Ukraine — than it was a year ago.

“Our world is interconnected, and our ambition to ensure that Russia pays a high price for its unprovoked invasion has already impacted us at home,” Yellen said, referring to a steep surge in energy prices.

“America is better able to handle these turbulent times because our economy is historically strong, and the American economy is historically strong because of the ARP and the resiliency of the American people,” Yellen said.

The ARP provided direct payments to Americans, funding for schools and increased COVID-19 responses and rental assistance, as well as a $350 million fund to assist state and local governments.

With congressional negotiations on the Biden administration’s ambitious social and climate spending package stalled, state and local funding has emerged as the Biden administration’s main social policy tool channeling funding to local programs aimed at achieving similar goals, such as child care, education and affordable housing.

She said the program has provided overtime and premium pay for over 740,000 essential workers, supplementing their regular wages.

Yellen said that the ARP spending “acted like a vaccine for the American economy, ensuring that we were inoculated from the possibility of new variants or unforeseen circumstances.”

(Reporting by David Lawder; Editing by Sandra Maler)

By Elizabeth Dilts Marshall

NEW YORK – World shares slid on Friday, pressured by uncertainty about the conflict in Ukraine and expectations the Federal Reserve will hike U.S. interest rates next week.

The Nasdaq and the S&P 500 fell, weighed down by tech and growth stocks. Oil prices settled up for the day but down for the week in volatile trading.

Investors kept their focus on Ukraine, where Russian forces bearing down on Kyiv regrouped northwest of the capital. Ukraine’s President Volodymyr Zelenskiy said his country had “already reached a strategic turning point” in the conflict.

The U.S. announced a ban on imports of Russian seafood, vodka and diamonds and made it harder for Russia to access funds from the International Monetary Fund, as Washington and its allies ramped up sanctions.

Financial markets have swung wildly during the war in Ukraine, now in its third week, as investors also braced for central banks to tighten monetary policy to tame inflation just as the global economy begins to slow.

U.S. consumer sentiment fell in early March by more than expected on inflation concerns, according to a Friday report, while data released Thursday showed consumer prices in February notched their largest annual increase in 40 years.

Next week, the Fed is expected to begin raising interest rates, and the Bank of England is expected to continue its rate-hikes, especially after January’s economic growth numbers from the U.K. came in stronger than expected.

“While investors have accepted the Fed will likely begin raising rates next week, there is still a lack of clarity of how far and how fast the Fed moves from there,” Lindsey Bell, Ally’s Chief Markets & Money Strategist wrote in a note Friday.

“With the market taking action (in the form of volatility) and possibly reducing demand, the Fed may not have to move as quickly. Still, the pace of inflation will be the key driver of policy changes for the better part of this year.”  

At 4:50 p.m. EST (2150 GMT), MSCI’s gauge of stocks across the globe was down 1.15%.

The Dow Jones Industrial Average fell 229.88 points, or 0.69%, to 32,944.19, the S&P 500 lost 55.21 points, or 1.30%, to 4,204.31 and the Nasdaq Composite dropped 286.15 points, or 2.18%, to 12,843.81.

Investors may be put off by how statistically expensive the S&P 500 is, according to analysts at Bank of America. The benchmark U.S. equity index is statistically expensive on 14 of 20 measures. [LIVE/]

Europe’s benchmark STOXX 600 index closed 1% up, making this the first weekly gain after three consecutive weeks of losses.

Emerging market stocks lost 1.55%. MSCI’s broadest index of Asia-Pacific shares outside Japan was 1.67% lower, while Japan’s Nikkei lost 2.05%.

Oil futures have soared since Russia’s invasion of Ukraine, hitting their highest levels since 2008 during the week and pulling back sharply as more supply looked to come online.

Brent crude futures settled up 3.05% at $112.67 a barrel, and U.S. crude settled up 3.12% at $109.33.

The dollar rose, notching a five-year high against the safe-haven yen, while commodity-linked currencies slumped.

The dollar was last up 0.78% against a basket of six global peers at 99.12. The index was on track for a 0.56% increase for the week, following last week’s 2% rise, which was its largest weekly percentage gain since April 2020.

The greenback hit a five-year high against the Japanese yen, which was down 0.99% at 117.28 yen

The euro was last down 0.65% to $1.0912.

(Reporting by Elizabeth Dilts Marshall in New York; Additional reporting by Tom Wilkes and Joice Alves in London; Editing by Chizu Nomiyama, Catherine Evans, Jonathan Oatis and David Gregorio)

By Marc Jones

LONDON – The cost of Russia’s invasion of Ukraine will become a lot clearer this week, with a previously unthinkable sovereign default looming, more emergency central bank measures likely and a stock market crash guaranteed if it reopens.

Moscow’s “special operation” in its former Soviet neighbour has cut Russia off from key parts of the global financial markets by the West, triggering its worst economic crisis since the 1991 fall of the Soviet Union.

Wednesday could mark another low. The government is due to pay $117 million on two of its dollar-denominated bonds. But it has been signalling it will not, or if its does it will be in roubles, tantamount to a default.

Technically it has a 30-day grace period, but that is a minor point. If it happens it would represent its first international default since the Bolshevik revolution over a century ago.

“Default is quite imminent,” said Roberto Sifon a top analyst at S&P Global which has just hit Russia with the world’s biggest ever sovereign credit rating downgrade.

That state-run energy giants Gazprom and Rosneft have made international bond payments in recent days and around $200 billion of still-unsanctioned government reserves does leave a sliver of hope that might not happen, though those odds look grim.

Wednesday could be busy for other reasons as well.

Russia’s Vedomosti financial newspaper reported central bank and Moscow Exchange sources as saying this week that suspended local equity and bond trading could resume by then.

It would be chaotic at least in the short-term. Russia’s big firms which also listed on the London and New York markets, have saw those international shares slump virtually to zero when the crisis broke out and have now been stopped.

“There are many financial institutions that are sitting on Russian assets that they want to get rid of but they can’t,” said Rabobank currency strategist Jane Foley.

“They have no real option but to sit on them. But that means that when they are allowed to trade, the selling could be quite persistent.”

RECESSION

It will not finish there. Russia’s central bank is scheduled to meet on Friday having already more than doubled interest rates to 20% and brought in widespread capital controls to try and prevent a full-blown financial crisis.

Western investment banks like JPMorgan now expect the economy to plunge 7% this year due to the combination of bank run worries, sanctions damage and the instant inflation surge caused by a 40% slump in the rouble.

That compares to predictions of 3% growth at the beginning on the year. It also means a peak-to-trough dive of around 12%, which would be larger than the 10% tumble in the 1998 rouble crisis, the 11% lost during the global financial meltdown and the 9% slump of the COVID-19 pandemic.

“The CBR might hike rates a bit further, that would be safest assumption right now,” said Arthur Budaghyan, chief emerging market strategist at BCA Research.

The more crucial moves as this stage however could be further capital control measures to try and keep the financial system cocooned.

“Ensuring the banks can function, can still process payments and keep credit flowing to the economy so it can at least function in some capacity is much more important,” Budaghyan said.

(Reporting by Marc Jones; Editing by David Gregorio)