Volatility has been a hallmark of this year’s trading activity and global stocks markets but Russia’s military attack on Ukraine has further rattled markets. Stocks tumbled while the price of oil jumped to $105 a barrel and European natural gas futures soared 40%.
Volatility has been a hallmark of this year’s trading activity and global stocks markets but Russia’s military attack on Ukraine has further rattled markets. Stocks tumbled while the price of oil jumped to $105 a barrel and European natural gas futures soared 40%.The impact on financial and commodity markets was immediate, starting in Asia, where the Hang Seng in Hong Kong lost 3.2%,spreading to Europe with Germany’s DAX index sliding more than 4% and the broader Stoxx Europe 600 slipping 3.5%.
In the UK, the FTSE 100 was down over 3% while the S&P 500 tumbled 2.5% and the volatility is expected to continue due to the geopolitical risks. There are fears over the potential impact international sanctions could have on Russia’s energy and supply chains.
Disruption could exacerbate already high inflation and prompt central banks to respond with rapid interest rate rises.
Sentiment had already turned negative this past week with the Stoxx Europe 600 reversing early gains to fall 0.3% on Wednesday while the S&P 500 ratcheted its fourth consecutive day of losses, losing 1.8% and sliding deeper into correction territory — a drop of more than 10% from a recent high. It is now 11.9% off its Jan. 3 peak.
Global markets were not pricing in a war scenario and are now adjusting given the magnitude of this military move, according to a new paper by Amundi looking at the Russia-Ukraine escalation.
Authored by Vincent Mortier, group chief investment officer, Matteo Germano, deputy group chief investment officer, Monica Defend, head of the Amundi Institute, and Pascal Blanque, chairman Amundi Institute, the paper noted that, “The escalation in geopolitical tensions between Russia and Ukraine adds uncertainty to the global outlook at a time when central banks are acting to fight inflationary pressures.”
The authors said, “it will take time for the situation to settle down. In the meantime, uncertainty and volatility will persist, with the possibility of seeing some excesses to the downside.”
Stefan Kreuzkamp, chief investment officer at DWS, added, “We expect markets to remain very volatile for some more days until there will be clarity about the scope of Western’s sanctions and a better understanding of whether Putin will stop at the Ukrainian borders to other post-Soviet states.
©Markets Media Europe 2022
[divider_to_top]
