Europe
European markets saw a downward spiral as the week began following Russia’s resistance to back off from Ukrainian borders. This built-up fears of further inflation and economic slowdown throughout the markets. The markets did correct towards the end of the week, but they still finished in negative territory.
The German Dax index dipped due to the decision to halt the Nord Stream 2 gas line, furthermore, putting economic pressure on Russia. The pipeline was set to alleviate energy-transportation bottlenecking throughout Europe at the cost of further dependency on Russian energy.
Throughout the entire week, we saw a variety of sanctions being imposed by the European Union. The UK froze assets for a range of major Russian nationals and Russian companies that have ties in London. This would stop them from accessing Sterling pounds and clearing payments through the United Kingdom. In addition, several European countries-imposed penalties on trades and technology imports alongside the travel ban and air restrictions on Russian registered aircraft.
Many European countries also supported blocking Russian bank access to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment system. However, this could negatively affect the European markets since these countries are large trading partners with Russia. These sanctions are in place to isolate and cripple the Russian economy and limit Russia’s ability to spend the current cash reserves of $630 billion.
During the week, we saw the Russian index reach all-time lows. In the first hours after the invasion, the Russian index showed a 50% loss representing around a $200bn loss.
Japan/Asia
The Asian stock exchange saw its equities stumble in the wake of the Russian/Ukraine clash. The TOPIX index also opened low on a note with investors avoiding risks between Russia and Ukraine.
On the other hand, Japan also imposed sanctions against Russia, emphasising cooperation with the international community. Japan imposed embargoes on exporting chip exports to Russia and suspension of visa issuance for Russian individuals. On Wednesday, Tokyo announced a ban on the issuing and trade of Russian government bonds in Japan. Prime Minister Fumio Kishida stated Japan has enough crude oil reserves and Liquid Natural Gas (LNG) to last for at least two to three weeks, and it would do its utmost to limit the economic impact by ensuring a stable supply of energy.
Chinese Indexes also saw a drop as turmoil struck Europe and the Russian president proceeded into Ukraine. This was not a surprise since the Chinese are a close trading partner to the Russians.
The Yan suffered against the dollar. This came on Thursday as the global sell-off sought after safe-haven assets as there is uncertainty with regards to the geopolitical stance in eastern Europe.
China has maintained a neutral stance on the issue, as it refrained from condemning Russia despite the intensifying attack on Ukraine. The Industrial & Commercial bank of China Ltd halted issuing US dollar-denominated letters of credit for Russian commodities that were ready for export. This is because they may fear sanctions could also be imposed against them.
In other news, Chinese confidence in domestic property was sharply affected after reviewing Evergrande’s debt. China’s new home prices have continued to rise since January as both the government and lenders made efforts to stimulate property sales. The property market’s stability has been brought about through increasing mergers amongst debt-burdened real estate developers.
United States
The federal reserve is expecting to increase interest rates towards the beginning of next month with a gentle stance towards its slope of increment, which was brought forward by the commodity surges. Central bankers have been debating over an adjustment of the interest rate between 25 to 50 basis points in March. The Ukrainian conflict has also brought further volatility to the countries’ indexes, causing the Nasdaq to enter bear territory. However, we did see a positive turnout for the Nasdaq and S&P500, following President Biden’s announcement of more sanctions against Russia and sending additional troops to be based across Europe.
Commodities
Commodity prices have surged throughout the week as there may be fears of supply disruptions post Russian invasion of Ukraine, as Russia is a key producer of energy, grains, and metals. The sanctions in place must be carefully considered by the head of states as they could put a strain on the commodities supply to Europe.
Aluminium prices continue to increase to a record high in a 10-year period sparking fears of supply deficit due to sanctions. Russia currently produces 6% of the world’s aluminium.
Brent crude oil traded at more than $100 per barrel on Thursday, which is an all-time high since 2014 and EU Natural Gas traded at €140 amid fear of Russia completely cutting supplies off to Europe.
As investors sought refuge in these volatile markets, they thought they would find a safe-haven in gold. However, we saw the price on the 24th rise to $1,974 and statically drop down to $1,877 before stabilising.
Indices for the week
|
| Weekly Index |
| YTD Index |
|
| Index | Local Currency | Sterling Pound | Local Currency | Sterling Pound |
| UK |
|
|
|
|
| FTSE 100 Index | -3.82% | -3.82% | -1.99% | -1.99% |
| US |
|
|
|
|
| S&P 500 Index | 0.84% | 2.09% | -7.86% | -6.99% |
| Europe |
|
|
|
|
| Euro Stoxx 50 Index | -6.01% | -5.76% | -10.75% | -11.01% |
| DAX 30 | -6.58% | -6.34% | -11.54% | -11.79% |
| MOEX | 20.44% |
| -34.77% |
|
| Asia |
|
|
|
|
| Nikkei 225 Index | -2.48% | -2.50% | -8.13% | -8.73% |
| Hang Seng Index | -6.01% | -5.04% | -3.46% | -2.70% |
| MSCI Emerging Markets Index | -5.44% | -4.07% | -5.72% | -4.27% |
About Author
