Impact On Markets From Russia-Ukraine Crisis

While the world is still recovering from pandemic effects on the global economy. An announcement from Russian President, Vladimir Putin, put the global markets in turmoil.

Impact On Markets From Russia-Ukraine Crisis

24th Feb, 2022 was a tumultuous day for markets as it plunged amid Russia- Ukraine situation.

While the world is still recovering from pandemic effects on the global economy. An announcement from Russian President, Vladimir Putin, put the global markets in turmoil. The effects of military operations in Ukraine created ripples of uncertainty. And, this situation’s immediate impact was seen in Global markets.

As stated above,

This move has created lots of uncertainty in global trade, financial markets. And also national economies, including the U.S. economy.

Plus, this may lead to disruptions in the supply of trade and commerce. Further, the situation will lead to a spike in prices and generate risk.

How Market analysts reacted to this move:

“This puts central banks in a really tricky situation. A March hike from the Fed is being priced out (and) the number of Fed hikes this year is being lowered because …it feels like it’s the wrong time to start taking liquidity out of markets. Central banks may have to look through an inflation spike. Though that means ultimately rate hikes could become substantially bigger. I’d say medium-term inflation risks have increased substantially…

                                   – Justin Onuekwusi, Portfolio manager, London

“The market has been looking for an excuse to sell off and now they have a real one… They flick the switch when there is uncertainty like this and buyers go on strike.”

                                 – George Kanaan, Head of cash equities, Sydney.

“A war will trigger a food and energy crisis. Emerging-market countries, especially Turkey, Egypt, and Lebanon, are highly dependent on wheat produced in Russia and Ukraine. These countries are fighting high inflation…

“But the war has limited impact on global trade because apart from oil and natural gas, Russia doesn’t have supply chains that can impact the world, which is different from China.

                                – Dan Wang, Cheif economist, Shanghai
The impact on global markets:

There was a lot of volatility that impacted the market:

1) Euro witnessed the worst four hours since the beginning of the year. The volatility of the Euro and USD jumped highest since December 2021.

2) This move created complications in the Federal reserve’s expected monetary tightening effect. Plus, the local inflation rate runs at 40 years high.  

3) Lead to global sell-offs:

  1. a) Dow jones fell by 1 percent and Nasdaq lost 2.6 percent on Wednesday
  2. b) Sensex crashed by 2000 points on a stage. It was trading at 55563, which was 1668 points down from the opening.
  3. c) Nifty was 488 points lower at 16574 in Intraday.
  4. d) Stock markets in Japan, China, South Korea, and Australia were down by three percent.

4) Crude oil prices surged. Brent oil crossed the $100 mark.

5) Gold prices spiked, highest since January 2021 and traded at $1932

What risks impact the market?

1) Oil prices may continue to stay elevated

2) US Federal Reserve will hold a meeting next month to take a decision on hiking interest rates, and tightening liquidity. It is tentatively expected that Fed may not go for a steep hike or tightening.

3) For India, the rising fuel prices will impact the existing inflation rate.

That is a wrap,

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