Market movers: FTSE 100, oil, Shell, cryptocurrencies

Victoria Scholar, interactive investor's head of investment, runs through today's big stories and how financial markets are performing. 

EUROPEAN MARKETS

European markets are trading on a slightly softer note with travel & leisure trading at the bottom of the Stoxx 600 basket. The major bourses are under pressure while the FTSE 100 started in positive territory before returning lower again. 

After the fragile situation in Ukraine sparked a sell-off yesterday morning, markets have been trying to stabilize yesterday afternoon and this morning on the back of falling treasury yields in response to fresh sanctions and as a whole host of Western companies cut ties with Moscow. US tech stocks are already staging a tentative recovery from the geopolitical knee-jerk sell-off with the Nasdaq closing last night’s session in the green, as US companies appear to be less affected by the crisis than those in Europe.

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OIL

Having closed above $100 a barrel for the first time since 2014, Brent crude is trading around that key level, with oil markets drifting higher this morning. Expectations are that commodities including oil, for which Russia is a key global exporter, will see continued upside from here as the Ukraine crisis weighs on supply. However the market remains acutely sensitive to the headlines with any signs of de-escalation or a global co-ordinated supply release to the market likely to see Brent crude prices retreat towards $95 or $90.

SHELL

Shares in Shell (LSE:SHEL) are trading modestly to the downside after it announced plans to sever ties with Russia’s Gazprom as CEO Ben van Beurden denounced the Kremlin’s ‘senseless act’. It comes after BP (LSE:BP.) exited its stake in Russian state oil company Rosneft this week as the West rushes to disentangle itself from Moscow. As the UK government business secretary Kwasi Kwarteng said, "there is now a strong moral imperative on British companies to isolate Russia".

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There has been a mass exodus by Western companies from Russia in recent days as the Kremlin looks increasingly isolated and fragile. It is clear that while most pain will be felt by Moscow, these decisions will weigh on European businesses too, which will come through in their next quarterly results. The hit to BP is likely to be around $25 billion, while Shell is estimated to face impairments of around $3 billion, which explains why its share price reaction today was much more muted than that of BP yesterday. However the inflationary commodities complex will go some way to offsetting the impairment costs from retreating from Russia.

CRYPTOCURRENCIES

Bitcoin is surging more than 13% against most major currencies while ether is also up double digits, driven by demand for decentralised finance in Russia and Ukraine.

With the rouble slumping almost 30% this week to fresh all-time lows and with the West imposing sanctions on Russia’s central bank, cryptos, which operate outside the traditional financial system have seen a surge in demand as Russians look for ways to circumvent economic restrictions and the sharp devaluation of the rouble.

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Previous equity market sell-offs have been correlated with a drop in the crypto complex. However this time, things look different with crypto attempting to break away from traditional assets and prove its value in times of military conflict.