How Has Russia’s Invasion Of Ukraine Affected The Markets?
Russia’s covert pressure on the Eastern border regions of Ukraine spilt over into a highly overt military intervention on Thursday, sending shockwaves around the globe. How has the Russia / Ukraine situation affected the markets and what else could be coming? Let’s get into it.
The impact so far
Let’s have a quick look at the impact so far.
#1 The Ruble hits its lowest point… ever
Well, this one was probably quite obvious. In a matter of moments, the Ruble dropped from 0.0122 to 0.0111 on Thursday, smashing its previous low back in 2015.
USD/RUB, 10 years
Source: XE
The MOEX index crashed by as much as 45% before recovering slightly to close 33% down, while the RTS index ended Thursday with a loss of 39%. All in all, Russia’s biggest companies saw about $70 billion of value wiped off the table in a single day. Wow.
#2 Oil prices go through the roof
Brent Crude oil crossed the $100 mark. The invasion immediately puts at risk up to 1 million barrels per day of Russian crude oil exports that transit through Ukraine and the Black Sea.
Brent Crude (USD/Bbl) price, 12 months
Source: Trading Economics
Some analysts are predicting that barrel prices could hit as high as $130 by the summer, should disruption to Russian oil flows last that long. Prices haven’t soared so high since 2008.
As the third-largest oil producer on the planet, the world relies on the Russian black stuff. Going without it for a while is going to hurt many consumers, but avoiding will also greatly aid efforts to cripple the Russian economy.
#3 Sanctions hit Gazprom hard
Gazprom (GZPFY), the giant gas company behind the Nord Stream 2 natural gas pipeline, saw its stock drop 24.19% over the last week. Germany agreed to suspend the project and the United States has now imposed sanctions on the company.
#4 A crypto correction
Worried about rising tensions over the last few months, many Ukrainians had started buying up stablecoins, the dollar-backed electronic currencies often, like Tether (USDT).
The popular stablecoin then saw an immediate rise in trading volumes following the invasion and has now jumped to claim the third spot in the crypto rankings by market cap.
USDT price and volume, 1 week
Source: CoinMarketCap
#5 Global markets surge
Global markets made a major recovery on Friday, showing that traders believed the imposed sanctions were unlikely to significantly affect western economies.
The FTSE 100 closed up 3.9%, rebounding from an almost 4% drop following the Russian aggression. Similar rises were seen on France and Germany’s exchanges, while the Russian stock market, which fell 33% on Thursday, ended Friday up 20%.
What could be next?
If the crisis escalates further, the market is likely to take more of a beating as oil prices are expected to remain at an elevated level.
The Fed is also meeting next month to take a decision on hiking interest rates and tightening liquidity, there are expectations that they may not go in for a steep hike or tightening, but that remains to be seen.
Keep a close eye on gold prices. They moved the needle last week, but a prolonged crisis may see investors opting for the traditional safe haven on a much more significant scale.
Gold price, 1 week
Source: BullionVault
Banning Russia from using Swift
More EU countries, including France, Italy and Greece, have said they would back a ban on Russia using the Swift global payments network. Such a move would hit Russian trade hard, making it more difficult for companies in the country to do business.
If such a move goes through, expect big moves in the stock and currency markets.
Could crypto come to Russia’s aid?
Russian companies and individuals may turn to cryptocurrency to help bypass the controls that western governments are imposing on them, particularly transfers of money through the traditional banking system.
This would allow them to avoid using the dollar. Such a move isn’t exactly original, North Korea and Iran have been doing the same for years and to great effect.
What do you think?
What do you make of the international response so far? Do you agree with the Swift sanctions? Let us know by tweeting us at @_Contentworks!
Top trading events this week
There’s a fair bit going on this week, here’s when and where you need to tune in.
Monday
No significant events are planned.
Tuesday
● CNY — NBS Manufacturing PMI (FEB)
● AUD — RBA Interest Rate Decision
● CAD — GDP Growth Rate Annualized (Q4); GDP Growth Rate QoQ (Q4)
● USD — Markit Manufacturing PMI Final (FEB); ISM Manufacturing PMI (FEB)
Wednesday
● AUD — RBA Chart Pack; GDP Growth Rate YoY (Q4)
● EUR — Core Inflation Rate YoY Flash (FEB)
● CAD — BoC Interest Rate Decision
Thursday
● EUR — ECB Monetary Policy Meeting Accounts
● USD — ISM Non-Manufacturing PMI (FEB)
Friday
● USD — Non-Farm Payrolls (FEB); Unemployment Rate (FEB)
Here at Contentworks we closely follow market movements and prep content that we think your traders would love to read. Let’s get you started right here.
The Contentworks team
