– by Hakan Ersen
Frankfurt (Reuters) – The Russian attack on Ukraine has triggered a tremor on the international stock exchanges.
Global stocks tumbled Thursday as commodity prices soared. Crude oil cost more than $100 a barrel for the first time since 2014, fueling fears of a new surge in inflation. At the same time, investors were trying to assess the economic consequences of the West’s planned sanctions against Russia.
The leading indices Dax and EuroStoxx50 fell by almost three percent to 14,219 and 3866 points respectively. Moscow’s leading index RTS posted a record fall of a good 50 percent and was listed at 610.33 points, the lowest it was six years ago. The Russian currency also took a beating, falling to a record low. In turn, the dollar and euro rose more than 10 percent each to 89.9855 and 101.0273 rubles, respectively.
According to Ukrainian sources, Russia is attacking from several directions. According to Chris Weston, chief analyst at the brokerage firm Pepperstone, it is now a matter of assessing how bad the situation will get and what the effects of the additional sanctions expected by the West against Russia would be.
GAZPROM AND WESTERN STOCKS FALL ON RUSSIA EXPOSURE
US President Joe Biden has already given the green light for penalties against the controversial Nord Stream 2 gas pipeline from Russia to Germany. This brought Gazprom, the mother of the project company of the same name, the biggest drop in the company’s history. Shares of the gas producer fell more than 55 percent in Moscow to a four-and-a-half-year low of 126.53 rubles. The papers of the German utility Uniper and the Austrian oil company OMV, which are involved in financing the pipeline, also flew in a high arc from the depots. Uniper titles posted a record price drop of 16.7 percent. OMV shares collapsed in Vienna by 5.5 percent.
Companies with a strong commitment to Russia were also hit hard. The shares of the Austrian Raiffeisen Bank are heading for the biggest daily loss since the stock market crash of March 2020 with a minus of up to 12.7 percent.
EXPLODING COMMODITY PRICES FUEL FEAR OF INFLATION
At the same time, the price of oil jumped above the $100 mark for the first time in seven and a half years. The Brent variety from the North Sea rose at times by a good seven percent to $103.78 per barrel (159 liters). “Russian oil will disappear from the world market overnight if new sanctions are imposed,” warned economist Howie Lee of the OCBC bank. “Opec cannot produce enough to fill this hole.” The French futures contract on natural gas even increased by a good 40 percent to 125 euros per megawatt hour, as strongly as it was more than a year and a half ago.
Russia is also a major exporter of metals. Aluminum used in automobile and aircraft construction and tin used in food cans marked record highs of $3,449 and $45,380 a ton, respectively. At $25,375, nickel, which is needed to make steel, was the most expensive it was eleven years ago. This rally will be further fueled by the explosion in oil prices, said investment strategist Soni Kumari of ANZ Bank. Some metal fabricators may be forced to scale back production due to rising energy costs.
Since the rising commodity prices are increasing inflationary pressure and at the same time worsening the economic outlook, stock market traders are puzzled about the reaction of the central banks. However, Thomas Gitzel, chief economist at VP Bank, dampened hopes of fresh injections of money, since the economic consequences of the conflict have so far been manageable. “The inflation risks weigh too heavily.”
INVESTORS FLEE TO “SAFE HAVES”
Meanwhile, some investors fled to “safe havens” like gold. The price of the “anti-crisis currency” rose by up to 2.2 percent to a 13-month high of $1948.77 per troy ounce (31.1 grams). Analyst Jeffrey Halley from brokerage house Oanda trusts the precious metal to jump above the previous record high of $ 2072.50 from August 2020.
The world’s leading currency was also in demand. The dollar index, which tracks rates against major currencies, rose as much as 0.6 percent. Demand for US and German government bonds, which are considered safe, pushed yields on ten-year titles to 1.91 and 0.155 percent, respectively.
(Report by Hakan Ersen, edited by Sabine Wollrab. If you have any questions, please contact our editorial team at [email protected] (for politics and the economy) or [email protected] (for companies and markets).)