Sanctions on Russia Over Ukraine Rattle the Markets

Markets on edge

The markets have been unsettled for many reasons this year, but the escalating conflict between Ukraine and Russia pushed them past a symbolic milestone yesterday. The S&P 500 slipped into a so-called correction, defined as a decline of least 10 percent from the most recent high.

The 10-percent threshold is an arbitrary number, and futures suggest that markets could rebound somewhat today, but it reflects the unease among investors about how the conflict could play out. Russia and Ukraine collectively account for just over 3 percent of the global economy, but the consequences of their intensifying tensions — from sanctions to shortages and price surges — could hit some countries, industries and companies particularly hard.

Countries have introduced a barrage of penalties, coordinated to signal unity against Vladimir Putin. Among other things, the U.S. imposed “full blocking” sanctions on two Russian financial institutions, VEB and the military bank PSB, and restrictions on the country’s sovereign debt; Britain froze the assets of five banks and three Russian billionaires; the E.U. blacklisted Russian lawmakers and blackballed banks with links to separatist areas; and Australia, Canada and Japan joined in similar efforts.

• Officials acknowledged the initial sanctions were limited, with more severe punishments, such as imposing exports controls or severing Russia and its banks from the global financial system, reserved for punishing Moscow if it further escalates the conflict. “There is more to come,” Prime Minister Boris Johnson of Britain told Parliament today.

Energy markets are on edge. Crude oil futures are down slightly from yesterday, given that the initial round of sanctions didn’t directly hit Russian energy producers, aside from Germany pausing certification of a major gas pipeline. But oil remains near $100 a barrel, reflecting fears that a prolonged crisis could damage the global supply; analysts say oil could easily rise another $20 a barrel, reaching levels last seen a decade ago. (It’s worth noting that roughly one in 12 barrels that the U.S. imports comes from Russia.)

There are other knock-on effects. Companies, especially the U.S. banks at the center of any sanctions, are increasingly worried about retaliatory cyberattacks. There is speculation about whether the Fed will change course on raising interest rates. (For now, officials said they wouldn’t.) And even the governing body for European soccer is facing pressure to cut sponsorship ties to the Russian energy giant Gazprom and move its Champions League final from St. Petersburg.

What’s next? Though Western leaders are threatening harsher punishments if Russia persists, it’s unclear how much bite those will have. Experts say that Putin has insulated Russia’s economy from sanctions to some degree, and previous punishments didn’t deter Russian aggression. Meanwhile, the Kremlin warned that Americans would face economic blowback as well. It’s also unclear how far the U.S. will go, with Congress struggling to reach consensus.

And Putin appears determined to push ahead at nearly any cost: President Emmanuel Macron of France, during a visit with the Russian leader, reportedly “found that Putin was more rigid, more isolated, and had basically gone into a sort of ideological and security-minded drift.”

Listen to the latest episode of “The Daily” for analysis of Putin’s rationale for invading Ukraine. And sign up for a special daily email with the latest news and expert insight on the crisis.

HERE’S WHAT’S HAPPENING

Barclays freezes payouts to its former C.E.O. The British bank, in announcing better-than-expected earnings, said it would suspend the vesting of stock awards given to Jes Staley as financial regulators examine his ties to Jeffrey Epstein. That could amount to millions of pounds’ worth of pay being tied up for months.

U.S. Soccer settles an equal pay lawsuit with the women’s national team. Under the terms of the deal, the association will pay a total of $24 million to several dozen current and former players, effectively acknowledging that women had been underpaid for years. U.S. Soccer also pledged to equalize pay between the men’s and women’s national teams during their next collective bargaining agreements.

Online betting opens in New York with a bang. Gamblers have placed $2.4 billion in wagers in the state since betting was legalized there last month. That made New York the biggest gambling hub in the U.S., and led to nearly $80 million in tax revenue — and new worries about gambling addictions in the state.

Meta escalates its fight with TikTok. Facebook’s parent yesterday expanded the availability of Reels, a short-video format that competes with TikTok. The move comes weeks after Meta admitted that the Chinese-owned video platform was eroding its business, particularly among younger users.

Grayscale crowdsources a regulatory influence campaign. The asset manager urged U.S. investors yesterday to submit comments to the S.E.C., asking the agency to approve Bitcoin exchange-traded funds (like one it hopes to start). So far, the regulator has allowed only E.T.F.s linked to Bitcoin futures, not funds tied directly to the cryptocurrency.

Crypto’s uneasy relationship with the news media

As public interest in crypto grows, so has journalistic scrutiny of the industry. This has led to tension between some industry players and the news media. The latest sign of increasing mistrust came yesterday, in the form of an email to journalists from producers of the Ethereal Summit, rescinding a previous invitation. “Apologies if you were still considering coming out to Wyoming for the conference,” wrote a spokeswoman.

Notably, the event’s organizers — Decrypt, a crypto news site, and Consensys Mesh, a crypto incubator — last week sent a list of invitees that included Edward Snowden, a former intelligence contractor who disclosed surveillance secrets and who now leads the Freedom of the Press Foundation. (The foundation did not respond to a request for comment on whether Snowden will attend the event now closed to the news media.) Alanna Roazzi-Laforet, Decrypt’s publisher, told DealBook in an email: “We are creating a safe space for sharing and idea creation. This is a workshop and a retreat vs a public conference.”

Closed doors are “antithetical” to blockchain principles, said Matt Leising, a founder of DeCential Media and the author of “Out of the Ether.” He attended and participated in previous Ethereal events as a reporter for Bloomberg, and said shutting out potential critics does the industry a disservice. A strength of blockchain, he said, is that it’s open and accessible and “dissident opinions are favored.”

Hostilities between crypto and the news media seem to be “ratcheting up,” said Laura Shin, the host of the podcast “Unchained” and the author of “The Cryptopians,” a new book about cryptocurrency’s early days. Major industry players can be aggressive toward the news media, but Shin, a founder of the Association of Crypto Journalists and Researchers, said this does not necessarily reflect the actual state of relations. It “raises suspicions where they are not warranted,” she said.

Some recent examples: A BuzzFeed report revealed the identities of the pseudonymous founders of the company behind the popular Bored Apes Yacht Club NFTs, which prompted an outcry by some in the crypto community about “doxxing,” or disclosing individuals’ private information online. Shin just named an apparent hacker in a 2016 crypto heist — one of the industry’s great mysteries — and got the opposite response, she said: “I doxxed someone today, and everyone seems really happy about it.”

“Inflation is not only an economic phenomenon, it’s also a psychological one in politics, because it is a psychological proxy for things being out of control.”

— William Galston, a political scientist at the Brookings Institution, on why public discontent is widespread despite job growth and wage gains.

An update on governmental stock trading

Bipartisan agreement is hard to achieve, but Washington seems broadly motivated to restrict stock trading by lawmakers and officials in response to recent scandals and investigations. Here’s where things stand — and what comes next:

Fed officials are under tighter restrictions. The central bank has adopted new rules limiting investing activity. But Fed officials, who came under fire last year for multiple trading scandals may find themselves included in new legislation that imposes other restrictions.

Judges face stricter scrutiny, but how they fit into the bigger picture is still unclear. The Senate last week unanimously approved a bill that would end the judiciary’s exemption from the STOCK Act of 2012, which requires lawmakers to report trades. The House already passed a similar bill and the two could be harmonized, approved and signed into law quickly, said Gabe Roth of the judicial transparency advocacy group Fix the Court. But Speaker Nancy Pelosi appears to have other priorities.

Pelosi is focused on uniformity and consistency across government, her deputy chief of staff, Drew Hammill, told DealBook. Representative Zoe Lofgren, Democrat of California, is reviewing a series of legislative proposals on trading limits at Pelosi’s request, after the speaker got blowback for defending lawmakers’ trading practices. One of the many proposals would tighten reporting requirements and bar individual trading by members of Congress, the president, vice president, Supreme Court justices and top Fed officials.

There are other wrinkles to consider: Pelosi is awaiting Lofgrens’ recommendations, and Hammill suggested that combining all of the recommendations into a new bill might be an option. (Lofgren is expected to call a hearing soon.) Hammill reiterated Pelosi’s pledge to pass legislation before year’s end. The speaker has previously insisted that the judiciary should be subject to the same rules as everyone else, which some lawmakers and The Times editorial board argue could unnecessarily complicate approval of new restrictions.

THE SPEED READ

Deals

• Macy’s said it would not separate its e-commerce business from its physical retail stores, rejecting a demand by the activist investor Jana Partners. (WSJ)

• Calpers, the giant California pension fund, has hired Nicole Musicco as its chief investment officer. (FT)

• Blackstone has reportedly told clients that most of its funds will no longer invest in oil and gas exploration and production. (Bloomberg)

• “The Most and Least Diverse Venture Capital Firms” (The Information)

• J. Ira Harris, a top banker at Salomon Brothers and Lazard who helped make Chicago a hub for deal-making, died on Monday. He was 83. (Bloomberg)

Policy

• Two top Democratic lawmakers asked the Treasury Department to investigate the revolving door between key policy positions at the department and big accounting firms. (NYT)

• The Canadian authorities asked banks to unfreeze accounts associated with antigovernment protest organizers and those who blockaded the streets with their vehicles. (NYT)

• Hong Kong will require all of its more than seven million residents to take coronavirus tests next month, as the territory tries to contain its worst outbreak. (NYT)

Best of the rest

• Experts worry that the public health focus on the coronavirus may have set back fights against ailments like H.I.V. and malaria by years. (FT)

• How plans to end 3G cellular service could create headaches for millions of car owners. (CNBC)

• “In ‘Super Pumped,’ the Uber Founder Disrupts His Own Rise” (NYT)

• Major League Baseball may use once-obscure stats as the basis for bonuses. (WSJ)

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