United States
The S&P 500 has dropped continuously for four weeks, with the index closing at -3%. This slow start to the year has been caused by underlying issues from mid-2020 that were only emphasised with the crisis in Ukraine. The index had a mid-week rally; however, it was not enough to offset the drop in markets throughout the entire week.
Following the USA’s complete ban on Russian imports of crude oil in the previous week, the price of brent continued to surge throughout this week, recording a high of $130 per barrel and closing at $106 on Friday. This is still a large gain over the $78.1 at which the year began. We also saw a surge in gold price, which hit $2,050 on Tuesday but then closed on Friday at $1,988.
The NASDAQ has dropped 3.3% this week, positioning the tech index into a bear market, with a 20.3% drop from its all-time high. This comes amid various companies suspending operations in Russia which had an adverse effect on the index. Consumer stocks also performed below par due to Coca Cola and Starbucks suspending business from Russia.
The outlook towards inflation and the war has increased volatility within the week. With inflation nearing almost 8%, caused by higher energy, food, and consumable prices. It has influenced bond yields as 10-year yields jumped from 1.79% to 2.00%.
Europe
The European stock index rose 2.2% for the week, while the DAX lost some ground caused by geopolitical tensions in the region. The French CAC 40 also had a positive ending as it closed 3.28% higher, the Russian stock exchange (MOEX) remained closed throughout the week as more sanctions saw Russia lose track of its dominance within the EU market.
A price soar on nickel during the week resulted in a halt in trades as the LME suspended trading due to numerous brokers receiving margin calls, prices for nickel topped up to $100,000 per ton which marked its highest price in decades. Eurozone bond yields also rose as there has been expectations of an increase in inflation rates supported by a scheme to purchase bonds proposed by the European central bank.
The EU also continued imposing sanctions on Russia over the week, restricted access to capital markets, and various payment systems saw the country facing troubles in financial participation through the financial globe. In addition, various oligarchs also saw some of their assets being frozen along with the Foreign Minister, Sergei Lavrov, with controls on imports of high-end technology.
The United Kingdom and other European nations have spoken about seeking to stop reliance on Russian gas and oil by the end of 2022. Britain’s business minister Kwasi Kwarteng insisted that he explore options to substitute Russian energy, which accounts for 4% of the UK energy supply. This move has also been considered by the United States as major western oil companies such as Shell and British Petroleum saw an exit in the Russian state.
On the other hand, Germany is still against the Russian oil and gas ban as there may be fears that an immediate ban on energy supply may hurt the German economy. Concerns have also risen as Russia has threatened to cut off the supply of energy to counter some of the sanctions it has been imposed. Germany’s reduction in Russian oil purchasing would mean the government would consider lifting its self-imposed ban on drilling oil and gas in the Baltic seas, which they are massively against.
Japan
Markets in the country saw a loss over the week as the uncertainty in the Ukraine crisis intensified. Volatility within the markets seems to have not settled, which tempered with investors’ risk appetite as commodity markets soared. The Yen traded at 116.71, which was still weaker to the dollar as the Nikkei 225 closed off the week at a lower note eroding gains it released on Thursday. 10-year Japanese bond yields rose to 0.18% from 0.15%, corresponding to the FEDs outlook on inflation and increased optimism for an end in the Russia Ukraine conflict.
Rising prices of oil within the markets have caused an increase in the price of goods and services traded between companies which caused the producer price index to rise. With fears of a further increase in inflation, the BOJ Governor Haruhiko Kuroda saw a contractionary monetary policy unnecessary despite increases in commodity prices as the central bank seemed to have a dovish stance on current economic occurrences.
On the other hand, Japan’s economic growth slowed down due to weaker spending by consumers. In the first quarter of 2022, we saw an increase of 4.6% compared to 5.4% within the fourth quarter of last year.
In other news, Japan continues to increase its restrictions to freeze assets in Belarussian banks due to Russia’s attack on Ukraine. Sanctions will be imposed from the 10th of April as Japan continues to put pressure on Moscow with several constraints on its financial establishments and exports supported by Japanese companies suspending operations in Russia.
China
This week saw China reporting losses as there has been a reoccurrence of Covid19 outbreaks coupled with the war in Ukraine. The heightened metal prices also negatively affected manufacturing and the industrial sectors, which contributed to the weeks’ indexes closing at a loss. The Shanghai composite saw a drop to 3.96% along with a drop in the Hang Seng, as China initiated a clampdown in the city of Shenzhen to limit business activity because of the rising covid cases.
In addition, China stocks tumbled as there will be a delisting warning by the SEC. Five Chinese companies listed in New York could be subject to delisting provided they fail to comply with the SEC audit requirements as Chinese security laws restrict sharing of company records with foreign regulators. The listed companies include Yum China Holdings, which runs KFC and Taco Bell in China, and Bei Gene, which runs drug development in China.
The Producer Price Index (PPI) also rose to 8.8% in February, impacted by rising commodities prices in February. This was slightly above the forecasted figures as CPI (Consumer Price Index) was also at 0.9% in February, unchanged from the previous month despite transportation and communication prices increasing over the past couple of months.
10-year bond yields from China have also increased, tracking US treasury yields as a contractionary monetary policy looming over the federal reserve is anticipated. Chinese bond yields rose to a high of 2.897% before closing at 2.836% caused by fears of liquidity.
Markets for the week
|
Index |
Last week in Local Currency |
YTD in Local Currency |
Last week in GBP |
YTD in GBP |
|
UK |
|
|
|
|
|
FTSE 100 Index |
2.84% |
-2.30% |
2.84% |
-2.30% |
|
US |
|
|
|
|
|
S&P 500 Index |
-2.85% |
-11.61% |
-1.88% |
-8.51% |
|
Europe |
|
|
|
|
|
Euro Stoxx 50 Index |
3.72% |
-14.02% |
5.21% |
-14.19% |
|
Asia |
|
|
|
|
|
Nikkei 225 Index |
-3.17% |
-12.60% |
-1.88% |
-11.28% |
|
Hang Seng Index |
-5.86% |
-11.87% |
-5.11% |
-9.15% |
|
MSCI Emerging Markets Index |
-4.68% |
-10.16% |
-4.13% |
-8.59% |
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