01 Mar

Financial markets are weighing the risks after the imposition of sanctions against Russia

March 1, 2022

by JustForex

The markets’ focus remains on Russia’s aggression against Ukraine and the sanctions imposed by Western countries against Russia, which has sharply increased uncertainty in the global financial markets. The US stock indices closed Monday with a slight decline. By the close of the stock market Dow Jones Index (US30) decreased by 0.49%, S&P 500 (US500) decreased by 0.24%, and the NASDAQ technology index (US100) increased by 0.41%.

On Monday, OFAC, a division of the US Treasury Department, issued a directive barring US residents from any transactions with the Central Bank, the Russian Treasury, and the sovereign wealth fund.

Disney, Warner Bros., and Sony suspended film distribution in Russia. The streaming video service Netflix refused to broadcast 20 Russian federal television channels.

MasterCard has disconnected several Russian banks from its payment system.

The United States expelled 12 Russian diplomats from the United Nations, citing national security concerns. Russia called the move “hostile.”

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Japan imposed sanctions on 49 Russian companies and organizations and six Russians, including President Vladimir Putin and Deputy Chairman of the Security Council Dmitry Medvedev. The assets of Central Bank, Promsvyazbank, and VEB are frozen in Japan. The Shell Company decided to withdraw from its joint ventures with Gazprom and cease participation in the Nord Stream-2 gas pipeline project.

European stock indices also closed yesterday in the red zone, following the US indices. German DAX (DE30) decreased by 0.73%, French CAC 40 (FR40) added 1.39%, Spanish IBEX 35 (ES35) lost 0.09%, British FTSE 100 (UK100) fell by 0.42%. Shares of the European banking sector fell in price against the background of sanctions against Russia. The shares of Austrian Raiffeisen Bank International AG, which derives nearly one-third of its profits from operations in Russia, fell by 14%. Shares of the Italian UniCredit and Intesa Sanpaolo banks have fallen by 12.35% and 7.97%, respectively, shares of Deutsche Bank have dropped by 7.5%.

The EU sanctions list also includes Igor Sechin, head of the Russian state oil company Rosneft, Transneft President Nikolai Tokarev, oligarchs Alisher Usmanov, Petr Aven, and Alexander Ponomarenko, as well as banker Mikhail Fridman.

Oil prices could rise further as investors continue to hold on to oil contracts as they fear supply disruptions from Russia, the largest oil exporter. Investors fear the imposition of sanctions against the Russian energy sector, as talk about it is already underway.

The Russian ruble plunged to a record low after the West cut off some Russian banks from the SWIFT financial network and limited the Russian Central Bank’s ability to manage $630 billion in international reserves.

Capital control is slowly being implemented in Russia. Capital control is a measure aimed at limiting capital outflows from the country. Such measures are not applied in market economies, since they reduce the country’s investment attractiveness and thus harm investment dynamics.

Ukraine is calling on the West to introduce a no-fly zone to stop Russian bombings. Yesterday’s Russians shelling of Kharkiv, a city of 1.4 million people, killed dozens of civilians, including children. In a video message, Zelensky said it was time to block the entry of Russian missiles, planes, and helicopters from entering Ukrainian airspace.

Asian markets have been rising since opening today. Japan’s Nikkei 225 (JP225) increased by 1.20%, Hong Kong’s Hang Seng (HK50) added 0.21%, Australia’s S&P/ASX 200 (AU200) increased by 0.67% today. The Reserve Bank kept its monetary rate target at 0.1%. RBA head Philip Lowe said the war in Ukraine is a new source of uncertainty. Inflation is expected to rise amid rising gasoline prices and energy costs. This means the benchmark official interest rate will remain unchanged at 0.1% for 17 months.

Main market quotes:

S&P 500 (F) (US500) 4,373.94 -10.71 (-0.24%)

Dow Jones (US30) 33,892.60 -166.15 (-0.49%)

DAX (DE40) 14,461.02 -106.21 (-0.73%)

FTSE 100 (UK100) 7,458.25 -31.21 (-0.42%)

USD Index 96.73 +0.12 (+0.12%)

Important events for today:
  • – Japan Manufacturing PMI (m/m) at 02:30 (GMT+2);
  • – China Manufacturing PMI (m/m) at 03:00 (GMT+2);
  • – Australia RBA Interest Rate Decision (m/m) at 05:30 (GMT+2);
  • – Australia RBA Rate Statement (m/m) at 05:30 (GMT+2);
  • – Switzerland Manufacturing PMI (m/m) at 10:30 (GMT+2);
  • – German Manufacturing PMI (m/m) at 10:55 (GMT+2);
  • – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+2);
  • – UK Manufacturing PMI (m/m) at 11:30 (GMT+2);
  • – Canada GDP (q/q) at 15:30 (GMT+2);
  • – Canada Manufacturing PMI (m/m) at 16:30 (GMT+2);
  • – US ISM Manufacturing PMI (m/m) at 17:00 (GMT+2).

by JustForex

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.


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