Market Monitor - 4 March 2022
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Market Monitor – 4 March 2022

Russia’s invasion of Ukraine has again dominated global markets this week, with uncertainty about the likely outcome of the war driving yet more sharp losses.

Although share prices had recovered to some extent during last Friday’s session, Monday and Tuesday saw renewed falls after the NATO member states opposing Vladimir Putin unveiled a package of economic sanctions far beyond what most analysts had expected.

Over the weekend, the United States, the European Union and their allies agreed to shut Russia out of the global banking system and freeze its central bank assets – the so-called “war chest” built up over the past eight years with the aim of enabling the country to withstand a prolonged loss of international trade.

In addition, many western nations have banned Russian aircraft and arrivals, while businesses in Europe, the US and the UK have taken steps to divest Russian holdings, suspend activity in the country or expel Russian nationals from their boards. The package of measures resulted in sharp losses in the ruble throughout the week, while the Moscow stock exchange has remained closed since Monday over fears of a mass sell-off of Russian company shares.

While it remains to be seen how effective these sanctions will be in curbing Putin’s military activity, it is clear they will have a serious impact on economies which traditionally do a significant amount of business with Russia – even though the current restrictions do not yet apply to energy supplies from Russia to the west.

The US

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.8% down for the week so far, with the S&P 500 losing 0.5%. America’s distance from the events in eastern Europe means that many of its businesses are insulated from the immediate economic impact of the Ukrainian crisis – although they will still feel the pain of rising energy and commodity prices in the weeks to come.

Federal Reserve chair, Jerome Powell, confirmed that he plans to press ahead with a small interest rate rise later this month, although there are suggestions that the Fed may tighten monetary policy at a slower pace this year in response to global events.

The UK & Europe

In the UK, the FTSE 100 closed on Thursday 3.3% down for the week, with the London Stock Exchange suspending trading in more than 25 companies linked to the Russian state – including energy giant Gazprom and financial institution Sberbank. Oil, mining and defence companies helped the FTSE avoid the steeper losses seen on the continent this week, but travel firms have again been affected following the ban on travel between Europe and Russia, and Russia’s decision to keep western planes out of its airspace.

In Frankfurt, the DAX index ended Thursday’s session down 6% for the week, while France’s CAC 40 lost 5.5%. Businesses and consumers in Germany are more likely than anyone to feel the impact of rising energy costs and the potential disruption of supply of oil and natural gas. Banks with significant exposure to the Russian economy – such as Commerzbank and Deutsche Bank in Germany and Société Générale and BNP Paribas in France – were among the biggest fallers this week.

Asia

In Asia, the Hang Seng index in Hong Kong dipped 1.3% to extend its recent losses as China’s latest data on service sector activity underperformed expectations. Japan’s Nikkei 225 index of leading shares, meanwhile, has had a positive week, closing Thursday’s session 0.4% ahead after Toyota managed to repel a cyberattack launched by what some observers suspected to be hackers based in Russia.

February 25
March 3
Change (%)
FTSE 100
7489.5
7238.9
-3.3
FTSE All-share
4167.1
4023.9
-3.4
S&P 500
4384.7
4363.5
-0.5
Dow Jones
34058.8
33794.7
-0.8
DAX
14567.2
13698.4
-6.0
CAC 40
6752.4
6378.4
-5.5
ACWI
698.5
688.3
-1.5
Hong Kong Hang Seng
22767.2
22467.3
-1.3
Nikkei 225
26476.5
26577.3
0.4

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, as at 3 March 2022.

4 March 2022
Mark King
Mark King
Head of Investment Content
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Market Monitor – 4 March 2022

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