How are crises in Ukraine hitting the global markets?
Tensions about a possible Russian invasion of Ukraine have pushed global markets to the brink of collapse.
The possibility of conflict in Ukraine, as well as the likelihood of increasing interest rates, shook the markets this week, sending prices plummeting as frightened investors fled stocks.
So, how are the markets performing, and what to look for in the days to come?
The US stocks wild moves
On Friday, January 28, Wall Street equities rose substantially at the end of a chaotic week across global markets, as investors assessed the likelihood of quick interest rate hikes by the US Federal Reserve and an optimistic earnings report from Apple.
The benchmark S&P 500 index in the United States surged 2.4 percent as a late-day rally gained traction, erasing a 0.8% decline earlier in the day. The increase was sufficient to bring the index in the red for the week, putting an end to a three-week losing streak.
The Nasdaq Composite Index gained 3% for the week, edging out a weekly increase of 1%. In recent trading sessions, both indexes have fluctuated sharply, with intraday swings this week driving volatility indicators to their highest levels since October 2020.
Other markets
Global equity markets were thrown into chaos as investors dealt with Fed raise worries and rising geopolitical tensions over Ukraine. Despite a small decline in Treasury rates, the king dollar pushed higher in the currency market.
European markets slumped widely on Friday, with the continental Stoxx 600 index down 1%. Hong Kong’s Hang Seng index dipped 1.1% in Asia, while Tokyo’s exporter-heavy Nikkei 225 increased 2.1%.
Revival of gold
Gold started the week strongly as international concerns spurred the run to safety. The small decline in Treasury rates aided zero-yielding gold as prices approached the $1845 barrier level. There is little doubt that this will be a pivotal week for gold, with the Fed meeting likely to affect its near-term outlook.
What to look for?
Inflation reaching multi-decade highs and expected interest rate hikes have wreaked havoc on bond markets, with US 10-year yields remaining near the critical 2% barrier and German 10-year yields jumping over 0% for the first time since 2019.
A large risk event often sends investors running back to bonds, which are widely seen as the safest investments. This time may be no exception, even if a Russian invasion of Ukraine risks further fueling oil prices and so inflation.
If tensions escalate into war, energy markets are likely to suffer. Europe relies on Russia for around 35% of its natural gas, most of which is sent to Germany via pipelines that span Belarus and Poland, Nord Stream 1, which runs straight to Germany, and others via Ukraine.
While the Ukrainian issue impacts the stock market, it’s vital to notice the convergence of numerous variables influencing the global economy right now. These include the persistence of COVID-19, negative labor and supply-chain shocks, inflation fears, the Federal Reserve announcing its intention to hike interest rates, and continuing economic inequality.
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