Selected Market Indicators for Periods to 28 February 2022

“There is no purgatory for war criminals - they go straight to hell”, Ukraine’s UN Ambassador Sergiy Kyslytsya said to his Russian counterpart at a United Nations Security Council meeting as news of Russian shelling in different parts of Ukraine followed Vladimir Putin’s decision for a full scale invasion.

Financial markets were roiled in February, as Russia’s invasion of Ukraine drove market volatility. The MSCI All Country World Index was down 2.6% in February, while the MSCI Europe Index was down 3.1% (both in local currency). Volatility was exemplified in Russian assets, which sold off sharply due to the imposition of sanctions and restrictions on a limited number of Russian banks from the SWIFT international payments platform. Global stock markets struck a ‘risk off’ tone and traditional safe haven assets such as sovereign bonds saw yields move lower as prices rose. Russia’s role as a major energy provider, especially to Europe, resulted in significant impacts to energy markets. Oil prices rose materially with Brent Crude closing above US$100 per barrel on 28 February.

Other commodities where both Russia and Ukraine are significant producers (including wheat and palladium) have also seen a sharp increase in prices, which is expected to continue to add pressure to global supply chains.

Central banks were required to tread a fine line as they navigated the initial wave of economic sanctions against Russia and the impact on global economy in the medium term. With the European Central Bank having to directly manage what they called a “dark time for Europe”, they stated their readiness to “take whatever action is needed to fulfil its responsibilities to ensure price and financial stability in the euro area”. In contrast, Federal Reserve (Fed) Chairman Jerome Powell continued to look forward, past the effects of Russia invading Ukraine, stating that it was too early to conclude what the effect on policy would be.

Russia’s invasion into Ukraine has induced financial disintegration from the West, at a time where the majority of European nations are dependent on its energy supply. The long term effects on the global economy are unknown. But it is clear that Russia’s invasion will come at a large cost – both in monetary terms, and in human life.

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3 June 2022