world markets

Russia-Ukraine conflict triggers shockwaves across financial markets

From 21-25/02/2022

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World stock markets were a sea of red as the Russia-Ukraine military conflict depressed risk sentiment. Investors globally rushed to the relative safety of gold and government bonds and dumped equities with various nations around the world condemning Russia’s actions. Gas and wheat prices surged while oil prices broke above $100 a barrel for the first time since 2014.

“This is a triple-hit to the global economy, with a toxic combination of higher inflation, lower economic growth, and greater uncertainty,” Ben Laidler, global markets strategist at eToro told Bloomberg.

Though predicting stock moves is impossible, analysts warn sentiment will be cautious for a while.


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AMERICAS

CANADA

Canadian markets gained for the week with the S&P/TSX Composite Index rising 0.47%. Financial stocks showed a significant move to the upside on Friday, a day when the benchmark notched its biggest gain in nearly four weeks. Notable strength was also visible among energy, industrial and material stocks. In other news, the Bank of Canada is set to make an interest rate announcement next week as part of its mandate to tamp down on soaring inflation.

US

For the holiday-shortened week of historic volatility, major indices closed mostly higher even as geopolitical concerns remain. The Dow Jones edged down by 0.1%, but the S&P 500 climbed 0.8% and the Nasdaq advanced 1.1%. US markets were closed Monday in observation of Presidents Day.

The combination of geopolitical turmoil, ongoing inflation pressures, and tightening central-bank policy pushed equities further into correction territory, declining 12% from their Jan. 3 high before rebounding later in the week. The geopolitical crisis also overshadowed another round of earnings reports and an abundance of economic data. Meanwhile, the U.S. and other allies have levied multiple tranches of sanctions on Russia.

LATAM

Brazil’s BOVESPA was off 0.01%. The Economic Climate Index (ECI), measured by Getulio Vargas Foundation (FGV), dropped 2.8 points in the first quarter of this year compared to the previous quarter. It is the worst result since the second quarter of 2020 (40.8 points). Other official data showed the country recorded an average annual unemployment rate of 13.2% in 2021.During the week, the government reported that its mid-month inflation reading was higher than expected.

ASIA/PACIFIC

JAPAN

Japanese stocks tumbled in tandem with a global sell-off throughout the week. The Japanese government announced two sets of sanctions targeting Russia. Business activity in Japan’s private sector contracted sharply in February,  while manufacturers signaled a moderate improvement in operating conditions.  Bank of Japan Governor Haruhiko Kuroda said that the central bank has no immediate plans to scale back its monetary stimulus.

CHINA

Chinese equities recorded a weekly loss with the Shanghai Composite Index falling 1.1%, and the large-cap CSI 300 Index losing 1.6%. The People’s Bank of China’s (PBOC) left the one-year and five-year loan prime rates unchanged, surprising some experts. The central bank also injected 300 billion yuan worth of liquidity into the banking system on Friday, far higher than the 10 billion yuan of expiring loans. Beijing pledged to maintain normal trade with both Moscow and Kiev while opposing sanctions and reiterating that Ukraine was a sovereign state.

AUSTRALIA

The ASX 200 ended the week 3.10% lower. After suffering a hefty $73 billion of falls on Thursday, the benchmark failed to mirror the positive US recovery lead. There were some interesting bright points in the Australian market that reversed that trend though.

Shares in Afterpay owner Block surged 32.49% after it reported better than expected fourth-quarter profit on Thursday. The company’s main listing on the New York Stock Exchange also saw stock prices jump 18% after hours.

EUROPE

EUROZONE

Stock market returns were negative with the pan-European STOXX Europe 600 Index ending 1.58% lower. Germany’s DAX Index, one of the most exposed to Russia, gave up 3.16% France’s CAC 40 Index retreated 2.56%, while Italy’s FTSE MIB Index plunged 2.77%. The European Union (EU) began imposing sanctions on Russia, including export controls on certain technologies and financial penalties on parliamentarians, the defense minister, wealthy individuals, and banks. Russia is a bigger trading partner for Europe than for the US. European banks have $90bn in Russian commitments compared to only $25bn for US banks. On the energy front, Europe depends on Russia for 45% of its coal, 40% of its gas and 23% of its oil.

CEE

In Poland, the WIG20 shrunk by 8.05% this week. Warsaw’s stock market tumbled as much as 12.7% on Thursday, the most in almost two years. So far this year, Warsaw’s WIG20 benchmark has dropped 10% in both zloty and dollar terms. Poland’s Deputy Interior Minister Pawel Szefernaker Saturday said 115,000 people had crossed the border into Poland from Ukraine since Thursday.

In Hungary, the BUX was off 8.89%  Hungary’s interest is to stay out of the military conflict between Ukraine and Russia, Prime Minister Viktor Orban said on Sunday, reiterating that Hungary would not send weapons to neighbouring Ukraine but would help all refugees from there.

REST OF EUROPE

In Russia, the stock market and currency took historic blows. The dollar-denominated RTS index of leading Russian stocks plunged as much as  32.66% this week. Trading on the Moscow exchange was suspended for some time on Thursday in light of the freefall.  The stocks hit the worst were banks and energy companies.

In the UK, the FTSE 100 was off 0.32%. The UK said it would stop Russian companies from raising capital in Britain and banned Russian airline Aeroflot.

In Switzerland, the SMI dropped 0.19% this week. Russian individuals and entities on a European Union blacklist will not be able to use Swiss banks to circumvent European sanctions against Russia over its invasion of Ukraine, Switzerland’s Financial Supervisory Authority (Finma) said on Friday.

MIDDLE EAST

(Note: Trading 20-24/02/2022)

Trading in the Tel Aviv Stock Exchange (TASE) in the fourth week of February was marked by decreases in prices in the leading share indices, similar to the trend in stock exchanges worldwide. The TA-35 index plunged 2.7% bringing year-to-date cumulative losses to 2.6%.

On the monetary policy front, the Bank of Israel left the interest rate in the economy unchanged, for the current month also, at the historic low of 0.1% that was set in April 2020.

The international credit rating agency, Fitch, again affirmed the State of Israel’s credit rating of A+ and left the outlook as “stable”.

In Saudi Arabia, the TASI lost 1.43% this week. Only eight stocks of 211 listed in the index ended in the green on Thursday. Energy state-owned giant Saudi Aramco rose nearly 2% to hit a record high as oil prices broke above $100 a barrel for the first time since 2014.

AFRICA

In South Africa, stocks as measured by the JSE Top 40 returned -2.77% over the week. On Thursday, JSE saw large losses, and fell almost 2% on the day while the SA rand lost almost 3% of its value. However, mining companies rallied as metal prices surged. Huge increases in SA fuel prices is expected next week, Minister of Mineral Resources and Energy Gwede Mantashe announced on Saturday.

In Nigeria, stocks marked a week of positive return during which equities yielded 0.40%. Investors on the floor of the Nigerian Stock Exchange, traded a turnover of 1.668 billion shares worth N19.481 billion in 25,979 deals during the week. According to NGX, the Financial Services Industry (measured by volume) led the activity chart with 1.120 billion shares valued at N10.889 billion traded in 13,514 deals.


Content Disclaimer:
This page has been prepared for informational purposes only. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.


For any comments, suggestions or corrections email: kbalkoudi@worldmarketsdaily.com
Kyriaki Balkoudi is a markets editor for World Markets Daily. She has a bachelor’s degree in Balkans Studies from Aristotle University of Thessaloniki, Greece and a master’s degree in International Politics from City University London, UK.


References:
“Global Markets Weekly Update”. T. Rowe Price. Feb. 25, 2022
“Weekly market wrap”. Edward Jones. Feb. 25, 2022
“Weekly Market Recap”. John Hancock Investments. Feb. 25, 2022
“Schwab Market Update”. Charles Schwab. Feb. 25, 2022
“Market Analysis”. Edmond de Rothschild. Feb. 25, 2022


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