Russia-Ukraine War Impact on Global Markets

Global markets are on the verge of collapsing due to fears of a Russian invasion of Ukraine.

The prospect of a confrontation in Ukraine rattled the stock markets, sending prices tumbling as fearful investors fled the stock market.

So, how are the global markets doing, and what might we expect in the days ahead?

The US Markets

On January 28, Wall Street shares gained sharply at the end of a tumultuous week, as many investors weighed the likelihood of rapid interest rate hikes by Apple’s upbeat earnings report.

The S&P 500 index in the United States rose 2.4 per cent as a late-day recovery gained traction, reversing a 0.8 per cent loss earlier in the day. The gain was enough to send the index into negative territory for the week, ending a three-week losing streak.

The Nasdaq Composite Index rose 3% this week, just beating out a weekly gain of 1%. In recent trading sessions, both indices have been volatile, with intraday swings this week driving volatility indicators to their highest levels since October 2020.

Other Markets

Global equity markets have been thrown into disarray as investors deal with Fed rate hike concerns and rising geopolitical tensions over Ukraine. So despite a slight decrease in Treasury rates, the dollar rose in the currency market.

European markets fell sharply, with the continental Stoxx 600 index dropping 1%. Tokyo’s exporter-heavy Nikkei 225 rose 2.1 per cent, and in Asia, Hong Kong’s Hang Seng index fell 1.1 per cent.

Conclusion

A multi-decade high in inflation and predicted rate hikes have wrought havoc on bond markets, with US 10-year rates hovering above 2% and German 10-year yields crossing 0% for the first time since 2019.

Uncertainty over the economy’s future typically prompts investors to return to bonds. However, energy markets may suffer if tensions between the two continue. With the Nord Stream pipeline running directly to Germany and others via Ukraine, Europe relies on Russia for about 35% of its natural gas.

In addition to the Ukrainian crisis, many other factors are influencing the world economy right now, including COVID-19’s persistence, supply-chain shocks, inflation fears, the Federal Reserve’s announcement of interest rate hikes, and economic inequality.

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