Shares are falling due to the troubles in Ukraine, oil storms have returned over $ 100

A Russian ruble banknote can be seen in front of the downward stock chart of this illustration, made on March 1, 2022. REUTERS / Dado Ruvic / Illustration

LONDON, March 1 – European stocks fell and oil jumped over $ 100 a barrel on Tuesday as markets battled huge uncertainty caused by Russia’s invasion of Ukraine, although the ruble has stabilized as Moscow fights for support for its besieged markets.

Russia’s stock markets remained stalled and some bond trading platforms no longer showed prices, but trading in major financial centers in both Europe and Asia was tidy overnight, albeit nervous.

Losses for the pan-European STOXX 600 (.STOXX) began to rise again, with the index falling nearly 2% by mid-session, and Wall Street was expected to open about 1% lower in New York later.

There were initially gains on equity (.SXPP) and oil and gas (.SXEP), but even that has worsened and there has been a sharp 4% drop in bank stocks, with investors now feeling that rising interest rates could entertain.

Paul Jackson, global head of asset allocation research, told Invesco: “If we do not accept a quick solution to this conflict, we fear that global GDP could be reduced by 0.5% -1.0%.”

“This is enough to worsen the ongoing slowdown, but it is not enough to cause a recession,” although he warned that some parts of Europe could experience a recession and that inflation is likely to remain higher for longer.

High-level talks between Kyiv and Moscow ended on Monday without an agreement, except to continue talks, and nerves were sharp when a huge Russian armored column descended on Kyiv on Tuesday after deadly shelling of civilian areas in Ukraine’s second-largest city, Kharkiv. Read more

As Russia is one of the world’s largest oil and oil producers, Brent oil futures rose $ 4.51, or 4.6%, to $ 102.75 a barrel. That was just below the seven-year high of $ 105.79 after Moscow launched its attack on Ukraine last week.

Natural gas prices in Europe also jumped by nearly 15%. Oil and gas prices have now risen by nearly 60 percent after fears of an invasion of Ukraine began to escalate in November.

“Ukraine’s fragile situation and financial and energy sanctions against Russia will keep the energy crisis and oil well above $ 100 a barrel in the short term and even higher if the conflict escalates further,” said Louise Dixon, senior analyst at Rystad Energy. , writes in a note.

RUBLES

The sense that war and higher energy prices could slow the global economy meant that eurozone bond yields continued to fall in bond markets as traders further cut their interest rates on the European Central Bank’s interest rates this year. .

The reference 10-year yield on US government bonds remained at 1.80% in European trade, more than 2% lower than two weeks ago as the euro resumed its decline in the foreign exchange market.

The boost to eurozone output growth slowed slightly last month, revised PMI data showed on Tuesday, although it is still strong, and companies said supply chain constraints have eased.

“Don’t let the fall in the PMI headline divert attention from what should be seen as a largely positive month for the eurozone manufacturing sector in February,” said Joe Hayes, senior economist at the IHS Markit data compiler.

The Russian ruble seems to have stabilized after falling 30 percent to a record $ 120 after Western countries hit Russia with the largest sanctions ever imposed on such an interconnected global economy.

These measures include excluding leading Russian banks from the international financial network SWIFT and sanctioning its central bank in an attempt to limit Moscow’s ability to allocate its $ 630 billion in foreign reserves.

Russia responded on Tuesday by temporarily preventing foreign investors from selling Russian assets to ensure they make a “considered decision”, Prime Minister Mikhail Mishustin said. The huge Russian sovereign wealth fund will also be forced to act by spending up to 1 trillion rubles ($ 10.3 billion) to buy shares in Russian companies, a source close to the government told Reuters.

However, the sanctions mean that the big global banks are now reluctant to trade with Russian banks and vice versa, which means that there are already two different currency markets for the ruble – one in Russia and one internationally.

Traders in London quoted the ruble between 101 and 105 per dollar, although according to some local market prices it was around 94 per dollar.

More generally, the volatility of the foreign exchange market is the highest since the end of 2020, as measured by the Deutsche Bank Index (.DBCVIX), and the ruble is down by almost 30% from its best levels this year.

“Today the focus will be on whether sanctions / revenge will start to affect Russia’s trade flows and whether (the Russian central bank) will intervene with more measures to support the ruble,” ING FX analysts wrote in a note to customers.

Meanwhile, trading in Russian stocks remains suspended on the Moscow Stock Exchange, and the prices of Russian government and corporate bonds are not shown on some trading platforms. JPMorgan’s widely tracked GBI-EM Global Diversified Index still included ruble-denominated Russian bonds, although Monday’s market crash reduced their so-called index weight.

Foreign investors held $ 20 billion in Russian government debt denominated in dollars and rubles late last year, according to the Russian central bank, while holding shares worth just over $ 85 billion, according to the Moscow Stock Exchange.

“Much of (global) price action is a function of uncertainty.” said Madison Faller of JPmorgan Private Bank.

Additional reports from Suja Rao in London; Edited by Chizu Nomiyama

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