After Russia began an all-out assault on Ukraine overnight, interactive investor's head of investment Victoria Scholar assesses the reaction of financial markets. There's comment on FTSE performers, oil, safe havens and Russian markets.
There is a sea of red across global markets with the DAX in Germany hit hardest among the major bourses, while the FTSE 100 has plummeted around 220 points, breaking below psychological support at 7,300.
The prospect of a Russian invasion of Ukraine, which has been keeping markets on edge lately, has become a perilous reality with President Putin seemingly undeterred by the barrage of sanctions that preceded today’s military escalation. There has been major condemnation of Russia’s actions by the West with further sanctions set to be announced throughout the day.
BIGGEST UNDERPERFORMERS / OUTPERFORMERS IN LONDON
Shares in the FTSE 100 listed mining company EVRAZ (LSE:EVR), controlled by Russian billionaire Roman Abramovich have plunged, shedding around 30% with the stock now down more than 70% year-to-date. London listed Russian gold miner Polymetal International (LSE:POLY) is also bearing the brunt of the selling, down more than 38% stuck at the very bottom of the FTSE 100.
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There are few places to hide for UK equity investors. Precious metals miner Fresnillo (LSE:FRES) is among a handful of stocks in the green on the FTSE 100, thanks to demand for safe-haven assets as investors look to protect their wealth amid the global market sell-off.
Meanwhile BAE Systems (LSE:BA.) is managing to stage modest gains thanks to strong 2021 earnings and buoyed by the prospect of strong demand amid the conflict which is providing some support for the European defence sector more broadly.
The energy complex is soaring, with UK natural gas futures up almost 30%, while Brent crude has aggressively broken through psychological resistance at $100 a barrel with a 7% surge, hitting the highest level since August 2014. After Russia’s invasion sparked an initial spike higher, oil prices have continued to travel north as markets assess the hit to energy supply that is likely to come as a result of the conflict.
Underlying bullish fundamentals coupled with a deepening military conflict would likely exacerbate the existing imbalance between demand and supply with the potential for oil prices to journey towards $110, possibly even $120 a barrel.
Safe haven assets are catching a bid with gold, silver and the US dollar index making gains. As investors attempt to find ways to protect their wealth, demand for safety assets has seen prices push higher with an intensification of the conflict likely to underpin an uptrend for assets like gold, the Japanese yen and the US dollar basket.
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Unsurprisingly the Russian market is taking the heaviest hit. The Russian MOEX equity market is down close to 40%, suffering its worst day on record.
Meanwhile the Russian ruble has slumped to a record low against the US dollar with USD/RUB skyrocketing above 85 as the worst-case scenario plays out. With the prospect of heavier sanctions and other financial penalties, international investors have lost all confidence in Russian markets and Russia’s economy as President Putin proceeds undeterred with the military operation in Ukraine.
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