Posted 24 Feb. 2022 at 9:11 amUpdated 24 Feb. 2022 at 04:26 PM
This time it’s war. While Moscow ordered the invasion of Ukraine on Thursday morning, the world stock markets are feeling the blow. European markets opened in a very sharp fall, in the wake of Asian stock markets. The Moscow Stock Exchange lost more than 45%, en route to the worst session in its history, and had to suspend trading for a few hours.
The CAC 40 also sank into the red in the afternoon. It plunged more than 4% just before the opening on Wall Street, to around 6,491 points, after hitting a new annual low point and reaching its lowest level since early October. The Parisian index has thus entered a correction: in financial jargon, this means that it is down more than 10% compared to its record of January 5. This is its most intense bearish phase since the stock market panic of March 2020, in the early days of the pandemic.
The Dax in Frankfurt dropped nearly 5%, while the EuroStoxx 50 dropped more than 4.5%. Wall Street also opened sharply lower: the major US indices lost more than 2.2% at the opening.
Market reactions were particularly violent on commodities, while investors rushed to government bonds and gold perceived as safe havens in times of crisis. “The market reaction to these events has been seismic,” judging Jim Reid laconically at Deutsche Bank.
Societe Generale, Renault and Alstom, very present in Russia, collapsed on the Paris Stock Exchange in the afternoon. Societe Generale collapsed by 12%, Renault fell by 10% and Alstom by 6.7%. Only Thalès and Dassault Systèmes were in the green within the Parisian index. Elsewhere in Europe, banking stocks are particularly under pressure. On the Milan Stock Exchange, Unicredit’s listing was temporarily suspended after a 9.1% fall, while Raiffeisen Bank, one of the most exposed to Russia in Europe, plunged 16% on the Vienna Stock Exchange. .
New penalties expected
The Russian military offensive in Ukraine, so feared by Westerners in recent weeks, was finally launched this Thursday morning at dawn. A series of explosions was heard in several cities in Ukraine, including the capital Kiev, following the “special military operation” launched by Vladimir Putin. Ukrainian President Volodymyr Zelensky has declared martial law across the country.
The condemnations of Western countries are multiplying. US President Joe Biden has promised to take further action against Russia. European Union leaders also plan to meet at the end of the day to discuss a new set of massive sanctions in response to Russia’s “barbaric attack” on Ukraine.
The war in Ukraine has completely eclipsed the other concerns of investors: “all eyes will remain focused on the economic sanctions against Russia which will be announced in the coming hours…”, stresses Christian Parisot of Aurel BGC.
The President of the European Commission, Ursula von der Leyen, specified that these new sanctions would target strategic sectors of the Russian economy by blocking their access to “essential technologies and markets”.
VIDEO. The European Union strongly condemns the Russian attack in Ukraine
Brent crosses $100
Brent crude, like US light crude oil (WTI), crossed the $100 mark for the first time since 2014 as investors feared the worst in global energy supplies. Brent was up about 7%, as was US light crude. They were above $104 and nearly $100 respectively, the highest since August 2014. Natural gas prices jumped 33% in Europe on the Rotterdam market, to more than $116, while the grain prices continued to rise.
“The events in Ukraine will significantly affect the rest of the world via inflation,” said Jim Reid. “Even before oil passed $100 a barrel overnight, the relentless rise in commodity prices showed no signs of slowing down,” he said.
Surge in fear index
Reflecting the nervousness that gripped investors, volatility soared. The VIX, nicknamed the fear index because it tends to jump in times of crisis, exceeded 37 points on Wall Street, the highest in more than a year. Its European equivalent, the V2X, soared to more than 40 points, its highest level since the first months of the pandemic.
In search of a little stability, investors turned to safe havens such as government bonds: the yield on 10-year US Treasuries fell by 10 basis points to 1.89%, while that of German Bund fell to 0.15%, down 7 basis points. The yellow metal meanwhile appreciated by 3.2% to 1970 dollars an ounce, the highest in more than a year. In euros, gold set a new historical record, at more than 1764 euros per ounce.
In Asia, markets ended in the red. In Tokyo, the Nikkei ended -1.81% after hitting a 15-month low, while the broader Topix fell 1.25%. In China, the CSI300 large cap index lost 2.03%.