Weekly Market Monitor – 18 Feb 2022
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Weekly Market Monitor – 18 Feb 2022

Stock markets around the world have suffered heavy losses this week as geopolitical concerns have taken centre stage. While the generally weak share price performance since the start of 2022 has been largely due to nervousness about rising inflation and the likelihood of higher interest rates, investors are growing increasingly anxious about the potential economic impact of conflict between Russia and NATO in Ukraine.

Western political leaders have this week repeatedly warned that Vladimir Putin is on the verge of sending ground forces into the country, and while the Kremlin said on Tuesday that it was starting to withdraw troops from the border, tensions rose on Thursday following reports of mortar attacks in the eastern part of Ukraine.

Given Russia’s importance as an oil and gas producer, any sustained military action is likely to send energy prices even higher: mainland Europe, for example, is particularly reliant on natural gas from Russia. Further spikes in the oil price – which hit seven-year highs at the start of the week – will only serve to increase inflationary pressures around the world, and could mean that sharper rises in interest rates are even more likely than at present.

The US

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 1.2% down for the week so far, with the S&P 500 losing 0.9%. Sharp losses on Thursday sent the S&P to its lowest level since October: technology businesses were hit especially hard, with Facebook owner Meta down more than 4% and Alphabet – Google’s parent company – losing 3.8%. Tesla stock, meanwhile, was 5% lower following reports that regulators in the United States are planning to investigate reports of problems with braking in some of the firm’s vehicles.

The UK & Europe

In the UK, the FTSE 100 closed on Thursday 1.6% down for the week, with travel companies and airlines hit hard by worries over the potential impact of conflict in Europe. Official figures showed that inflation in Britain rose to 5.5% in January – a new 30-year high, which makes further interest rate increases in 2022 even more likely.

In Frankfurt, the DAX index ended Thursday’s session down 1% for the week, while France’s CAC 40 lost 0.9%. German chancellor Olaf Scholz warned on Monday that military action by Russia would inevitably lead to the introduction of harsher sanctions – a move that could have significant economic repercussions for eurozone nations.

Asia

In Asia, the Hang Seng index in Hong Kong had lost 0.5% by close of trading on Thursday, having managed to claw back some early losses later in the week. Investors in China have been concerned about the spread of the Omicron Covid-19 variant in Hong Kong in recent weeks, although Chinese authorities appear to be bringing outbreaks under control elsewhere in the country. Meanwhile, there are signs that inflation has peaked, with price rises in many sectors starting to return to normal levels.

Japan’s Nikkei 225 index of leading shares closed 1.7% lower for the week on Thursday, with recent gains reversed by fears over the global impact of conflict in Ukraine.

February 11
February 18
Change (%)
FTSE 100
7661.0
7537.4
-1.6
FTSE All-share
4286.4
4212.9
-1.7
S&P 500
4418.6
4380.3
-0.9
Dow Jones
34738.1
34312.0
-1.2
DAX
15425.1
15267.6
-1.0
CAC 40
7011.6
6946.8
-0.9
ACWI
715.5
709.4
-0.8
Hong Kong Hang Seng
24906.7
24792.8
-0.5
Nikkei 225
27696.1
27232.9
-1.7

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, as at 17 February 2022.

18 February 2022
Mark King
Mark King
Head of Investment Content
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1 https://www.bloomberg.com/news/articles/2022-02-10/fed-s-bullard-backs-supersized-hike-seeks-full-point-by-july-1.
2 EU Chips Act: Europe’s plan to regain global leadership in semiconductors, ec.europa.eu, 8 Feb 2022.

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