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Archinomics Weekly - Monday 28th February 2022

2 months ago

the
MARKETS

Equities

Equity markets fell sharply on Thursday, as Russia invaded Ukraine, before recovering some ground as the week ended. US indices whipsawed, with the Nasdaq experiencing its biggest intraday move (6.8%) since the pandemic was declared in March 2020. European indices fell sharply, reflecting Europe’s significant economic ties with the conflict zone. Japanese indices showed negative returns on the week, as the prime minister offered reassurance on oil and gas reserves. Chinese markets fell in response to declining risk sentiment.

Bonds

US Treasury bonds were in demand as safe haven assets and yields fell, as prices rose, before the trend reversed somewhat. Both core and peripheral eurozone bond yields fell. Investment grade bonds traded lower for much of the week, with subdued appetite for new issuance. High yield bond markets struggled with risk off sentiment, although there were bargain hunters for higher quality paper.

Currencies

The US dollar was in demand, rising sharply against the Russian rouble and some other emerging market currencies. The yen, also viewed as a safe haven, weakened against the dollar, while the Chinese yuan gained slightly in response to foreign inflows.

Commodities

Oil briefly topped $100 per barrel, in anticipation of a supply shock, given that Russia is the world’s second largest oil producer. Gold was sought after as a safe haven, as volatility levels rose.

Responsible investing

German fund manager Allianz Global Investors, with over $670 billion under management, will vote against large European and UK companies failing to link executive pay to ESG metrics from next year.

MACROECONOMIC
UPDATE

Global sanctions were imposed on the Central Bank of Russia, freezing $630 billion of foreign currency reserves and sending the rouble into freefall.


Germany halted the approval of the Nord Stream 2 gas pipeline in response to Russia’s actions in Ukraine, prompting fears of further energy price spikes.


US January PCE inflation data, the Fed’s preferred target measure, rose 5.2% in line with expectations.

on the
RADAR

The response of President Putin to concerted and far-reaching Western sanctions will be closely monitored.


US February non-farm payrolls are expected to show another strong month, following the positive surprise of January.

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