Weekly Market Wrap 25/02/2022

Global markets recoiled as Russia invaded Ukraine. On Thursday morning, reports first emerged that Russian forces had entered eastern Ukraine and by Friday they had reached the Ukrainian capital of Kyiv. Major western countries including the UK, US and European Union have imposed some of the toughest ever sanctions on Russia, which aim to stunt the Russian invasion efforts by decreasing their ability to be part of the global economy and specifically targeting individuals close to the Kremlin. 

US Market 

The S&P 500 fell 1.38% to 4,288 whilst the Dow fell 2.26%. US markets finished the session positive on Thursday despite the ongoing invasion after a late rally following President Biden’s announcement of new sanctions on Russia. Markets had initially sold off early on Thursday as the first news of the invasion came through, however tech stocks pulled the market higher as an uncertain economic outlook could affect the pace at which the Federal Reserve will raise interest rates. 

 UK Market 

The FTSE 100 ended the week down 1.43% at 7,406, falling 3.88% on Thursday alone as the situation in Ukraine provided continued uncertainty. The index slipped further in the afternoon after Prime Minister Boris Johnson called for Russia to be cut off from SWIFT. A global payments system used by over 200 countries for international payments and trade. A number of EU states felt that this measure should only be viewed as a “very last resort”. 

 European Markets                                                                    

European markets fell this week, with Thursday hitting major indexes the hardest. The Euro Stoxx 50 lost 3.62%, whilst the DAX fell 4.21% and the CAC 40 dropped by 3.47%. However, markets did see some recovery on Friday morning after coordinated sanctions from the west on Russia. These include Germany’s decision to halt certification of the Nord Stream 2 gas pipeline, despite Europe’s gas supplies already running low. 

 Fixed Income

The US 10-Year Treasury yield has risen 0.10% to 2.00%. Yields initially sunk as low as 1.84% on Thursday after investors rushed to buy the safe haven asset. However, after President Biden’s speech, markets took a more positive outlook regarding the long–term economic impact of the invasion and returned to risk assets. 

 Commodities

Brent crude hit a seven-year high on Thursday, briefly rising to $105 a barrel. Despite pulling back from highs Brent finished the week up 5.57% at $98.75. Ongoing conflict will be expected to cause ongoing disruption for crude, coal and natural gas flows, despite the final decision on sanctions on Russian exports. 

 Gold fell 0.6% this week to $1,894, after rising steadily throughout February as investors had moved to traditionally safer assets ahead of potential conflict.  

 The Week Ahead  

Monday – UK Housing Prices

Tuesday – China Manufacturing PMI; US Manufacturing PMI

Wednesday – US Employment Change, Canada Rate Decision

Thursday – US Services PMI

Friday – Eurozone Retail Sales, US Nonfarm Payrolls 

*Price changes as of last week’s close unless stated otherwise.