United States
In contrast to the previous week, we saw the impact of geopolitical events in Europe affecting the US markets. With further pressure from the inflationary concerns previously had, the Federal Reserve chairman Powell “moved carefully” and stuck to a quarter-point increase in federal fund rates. This hike rate is expected to be at some point in March.
These two factors affected US treasuries as yields fell ever since Russia invaded Ukraine, with many seeking safety due to increased uncertainty. The bond market continued with negative results throughout the week. There was a drop in market sentiment that was brought about by increased volatility in equity markets and continuous disruptions within Europe.
Various US businesses announced that they would not be doing business with Russian companies or withdrawing from Russian markets. For example, one of the most well-known Index providers, MSCI, announced that it would remove any Russian holdings. In addition, the US president also proceeded to impose sanctions on Russian oligarchs who have close ties with the Kremlin to put the Russian economy under further pressure.
Markets closed lower than the previous week, mainly the S&P 500 and the Dow Jones. Contributors to this were technology stocks poorly performing due to the ongoing conflict between Russia and Ukraine.
On the other hand, commodities saw a continuous soar as oil reported a high price of USD120 / barrel. The higher commodity prices came due to a possible shortage in supply caused by an energy embargo in Russia. Gold also closed at USD 1,970/oz as people sought out safe havens amid the market’s ongoing volatility.
The United States, the United Kingdom, and the EU (European Union) agreed to exclude Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication (SWIFT). In addition, transactions giants Master card and Visa excluded Russia from its network, meaning that foreign credit cards will not work. However, the payment system companies clarified that cardholders could use them domestically until their cards expire.
Europe
Markets in Europe saw a sharp fall as there were continuous developments to the geopolitical crisis. Indices such as the Euro Stoxx 50, DAX, and the French CAC 40 dropped during the week as Russia’s nuclear armament threat grew.
The Core Eurobonds also saw a decline as peace talks for a cease-fire between the two nations became less feasible, resulting in several companies from the EU and the United Kingdom withdrawing their operations from Russia. For example, companies like Shell withdrew from their joint venture with Gazprom putting a complete halt on the Nord Stream 2 pipelines, and British Petroleum also withdrew the 20% stake it had with Rosneft. Additionally, to keep in line with the sanctions imposed by various countries, we saw many institutions halt trading of Russian securities. In the UK, we also saw major Russian banks delist from the London Stock Exchange, which resulted in large losses, such as the case of Sberbank where the price reached £0.01.
These negatively affected the Russian Ruble, with it plunging against major currencies despite the Russian central bank’s efforts to increase key interest rates from 9.5% to 20% to stabilise the currency and keep up with foreign currency demand. Despite all these efforts, the Ruble continued to deplete, lowering its value to under 0.01usd.
Asia
The geopolitical and economic uncertainty that has been brought about in Europe has caused volatility within commodity and stock prices. As a result, the Japanese stock markets registered losses for the week as indices closed lower. The Nikkei 225 and the TOPX also saw a low end as the Fed reported stricter monetary policy to curb inflationary fears.
Japanese Prime minister also sought to announce measures to alleviate the increase in oil prices through issuing subsidies to oil wholesalers and other affected sectors such as agriculture and transport. This effort has also been made to support small to mid-size businesses to cope with recent oil and energy price increases.
Japan plans to fund this subsidy from its fiscal emergency budget fund, which will come into act from the 10th of March. Members of the International Energy Agency also plan on releasing 7.5 million barrels from its reserves to curb the impact of this crisis on its domestic economy.
China will not impose sanctions against Russia as reported by the China banking and insurance regulatory commission.
The Peoples Bank of China may cut interest rates to battle the economic slowdown. Bond yields and 10-year government bonds also rose to 2.861% which reflected liquidity troubles within the economy.
The property market also continued to see a liquidity crunch. Defaults from developers have continued which have amplified downgrades in their credit ratings. This has discouraged banks from lending to private developers on concerns that they may be unable to repay loans amid a fall in sales and funding costs. This has also been seen as year-on-year sales of developers have continued to slide over the past few months.
Markets for the week
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| In Local Currency | In Sterling Pound | ||
| Index | Last week | YTD | Last week | YTD |
| UK |
|
|
|
|
| FTSE 100 Index | -3.31% | -1.53% | -3.31% | -1.53% |
| US |
|
|
|
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| S&P 500 Index | -1.25% | -9.01% | 0.24% | -6.76% |
| Europe |
|
|
|
|
| Euro Stoxx 50 Index | -5.75% | -12.77% | -6.75% | -13.85% |
| Asia |
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| Nikkei 225 Index | 1.39% | -6.76% | 2.58% | -5.74% |
| Hang Seng Index | -3.79% | -6.38% | -2.38% | -4.26% |
| MSCI Emerging Markets Index | -2.51% | -9.65% | -1.31% | -7.97% |
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