Europe At War: Six Charts You Need To Know In The Financial Markets

Women walk past a sign with US dollar and euro signs on a street in St. Petersburg, Russia, February 25, 2022. REUTERS/Anton Vaganov/File Photo

LONDON, March 5 – Russia’s escalating war in Ukraine has sent commodity and energy prices soaring, increased safe havens and hit the European single currency and its stock markets.

Below are six charts showing the recent sharp moves in the market:

Euro in depression

The euro fell below $1.10 on Friday for the first time in nearly two years, losing more than 3% against the dollar this week in its biggest weekly drop since March 2020.

The single currency suffered even greater losses against the Swiss franc. It fell almost 4% in a week, the biggest drop since January 2015, when Switzerland abandoned a three-year cap on the franc against the euro.

Worries that Russia’s invasion of Ukraine will hit the economy again, especially as energy prices soar, explains why the national currency was among the biggest losers of the week.

Euro fails

GRAIN AND METALS

Commodity prices from wheat to various metals have skyrocketed to multi-year highs as Western sanctions have disrupted air and sea travel for goods manufactured and exported by Russia.

Russia and Ukraine are the world’s two biggest exporters of wheat, which hit a 14-year high on Friday, up nearly 40% since Russia invaded Ukraine on Feb. 24.

Russia is also a supplier of metals. Aluminum hit an all-time high on Friday, while copper, for which the country supplies 3.5% of global supplies, is also flirting with a new all-time high.

Grain and metals

ENERGY AND GAS

Brent oil prices rose another 21% over the week to close at their highest level since 2013, with buyers and shippers increasingly avoiding Russian oil deliveries totaling up to five million barrels per day (bpd).

Neither the possibility of a million barrels of Iranian oil spilling in the event of a revival of the nuclear deal with the West, nor a deal by developed countries for a coordinated release of 60 million barrels, had any effect.

European gas prices rose by 120% in a week, reaching a record high of 208 euros per MWh.

Brent oil and European gas prices

EUROPEAN BANKS PENALIZED

European banks have had another grueling week, which has been hit by the triple whammy of Western sanctions against Russia, reduced rate hike expectations and worsening macroeconomic conditions.

The move reverses any gains made earlier this year, when it looked like the economic recovery would allow central banks to raise interest rates, which would benefit banks.

The European banking stock index fell about 16% (.SX7E) in its worst week since March 2020, resulting in a year-to-date loss of 20%. Russia-exposed lenders such as Austria’s Raiffeisen (RBIV.VI) and France’s SocGen (SOGN.PA) are down about a third in a week.

European banking stocks are down more than 16% this week

FAVORITE BEAMS

The turmoil in European markets, heightened uncertainty about the economic outlook and cuts in rate hikes have led investors to rush to buy safe-haven bonds.

In Germany, the eurozone’s benchmark issuer, 10-year bond yields fell 30 basis points this week, the biggest weekly drop since the 2011 euro debt crisis.

German bond yields of -0.08% returned to negative territory. In other words, investors are willing to pay the German government to hold their bonds in the face of uncertainty. This was not the case a week ago when the Bund yielded 0.22%.

Bund yield below zero

RUBLE DISABLE

The Russian ruble has fallen more than 30% in offshore trading – its worst week ever – and about 20% in trading in Moscow. The spreads between supply and demand are very wide – a sign of liquidity evaporating.

The divergence between onshore and offshore trade shows how disconnected Russia has become from global financial markets after tough sanctions and countermeasures.

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Reporting by Karin Stroheker, Dhara Ranasinghe and Sujata Rao in London; Editing by Christina Fincher

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