Weekly round up
Global markets were extremely volatile this week due to Russia’s military incursion in Ukraine. This led to a sharp fall in UK markets on Thursday, followed by a rebound on Friday with the FTSE 100 Index falling by 3.1% during the week to trade at 7,323 points at the time of writing.
Russian president Vladimir Putin announced an attack on its neighbouring country amid reports that Russian troops were crossing the Belarus-Ukraine border and landing on its southern coast. Explosions were reported in Ukraine’s capital Kyiv, and Ukrainian forces confirmed to have downed six Russian aircraft.
Investors fear that war with Russia will drive inflation higher due to energy and raw material supply disruptions, and derail the economic recovery, while US President Joe Biden said the West will impose severe sanctions on Russia.
At present, the sanctions have not targeted Russia’s oil exports and have not blocked Russian access to the Swift global payment network. The British Pound slipped to a four-week low of $1.338 on Friday, as investors rushed to the safe-haven dollar. The GfK Consumer Confidence indicator in the UK dropped to its lowest level in 13 months at -26 in February as consumer mood was dampened by persistently high inflation.
In the commodity markets, gold settled around $1,911 on Friday, after rising as high as $1,973 on Thursday after the West announced fresh sanctions on Russian banks. Putin warned other countries that any attempt to interfere with the Russian action would lead to “consequences they have never seen”, lifting gold’s haven appeal. Brent crude futures held above $100 per barrel following a dramatic session that saw the UK benchmark hit $105 before giving up gains amid concerns that financial sanctions on Russia may disrupt global fuel supply chains. Oil retreated after Western powers made it clear they were not willing to sacrifice their own economies to penalise Moscow for invading Ukraine. President Biden addressed energy supply concerns, saying the US will work with other major consuming nations on a coordinated reserves release. Japan and Australia indicated that they may be part of an international reserves release, but China said it had no immediate plans to intervene in oil markets.
US equity futures fell on Friday after the major averages saw a dramatic reversal in the previous session, with investors continuing to assess risks arising from Russia’s invasion of Ukraine. The Dow Jones Industrial average futures fell 0.64%, S&P 500 Futures declined 0.72% and Nasdaq Futures declined 0.75%. In Thursday’s regular trading session, the major averages turned higher following days of heavy selling. US markets initially sold off following Russia’s announcement of invasion before sentiment began to shift and investors began to buy the dip. Analysts argued that major geopolitical events are usually short-term market issues, especially if the economy is on a solid footing. Nevertheless, all three US averages remain in correction territory, with each down more than 10% from their respective record highs.
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