(updated version)
FRANKFURT (dpa-AFX) – Fear and caution prevailed on the financial markets on the last trading day of the week. In view of the war in Ukraine, which has been raging for nine days now, and the associated sanctions against Russia, investors on Friday looked for investment opportunities in German government bonds, the US dollar or precious metals. Compared to stocks, they are considered safer investment havens. The sell-off on the international stock exchanges intensified accordingly. Energy sources such as oil and gas, industrial metals such as aluminum and nickel, and grains such as wheat and corn once again became more expensive on the commodity markets. Gold rose toward $2,000 an ounce.
“The Russia-Ukraine war is having a wider impact on the markets,” wrote analyst Manfred Bucher from Landesbank BayernLB. Despite a second round of talks between representatives of Russia and Ukraine, there are no signs of relaxation. The financial markets are threatened by the scenario of stagflation, i.e. weak growth combined with high inflation.
Such a scenario is poison for stock markets, and so the leading German index Dax (DAX 40) experienced another black day. It fell towards 13,000 points to its lowest level since the end of 2020. The stock exchanges also continued to drop across Europe. The Asia-Pacific markets had previously closed very weakly. The Japanese Nikkei index fell to its lowest level since November 2020. Wall Street also posted losses at the close in Europe, albeit again less severely than on the other side of the Atlantic.
Investors probably also closed stock positions again so as not to be caught on the wrong foot by new bad news from Ukraine after the weekend, said stockbrokers.
In particular, high and rising energy prices are causing investors to shift funds from risky assets such as stocks to safer assets such as bonds, precious metals and cash. “Natural gas prices are trading at record highs. The Russia-Ukraine war is driving up European corporate bond yields,” wrote Ulrich Stephan, chief strategist at Deutsche Bank. However, the resulting increase in capital market interest rates made it more expensive for companies to refinance and thus eroded their profits.
Against this overall very unsettling backdrop, cyclical sectors in particular were hit hard on the stock exchanges. The automotive sector – prominently represented in the German Dax with BMW, Volkswagen (Volkswagen (VW) vz), Mercedes-Benz (Mercedes-Benz Group (ex Daimler)) and Porsche (Porsche SE Vz) – fell by a good five and a half percent.
The sector has now completely given up the gains it had made since early 2021. Global economic concerns are likely to put pressure on demand for cars, and deliveries to Russia have also been suspended. In addition, there are sharply rising energy and fuel costs. And finally, supplies from Ukraine are no longer available. “At least for the next few weeks, production outages can still be expected, including among automobile manufacturers,” writes Landesbank LBBW.
In Moscow, the stock exchange will remain closed at least up to and including next Tuesday due to the war in Ukraine. It is thus heading for the longest closure in modern Russian history. Index providers announced that they would remove Russian stocks from their indices. European companies with business activities focused on Russia lost more than 100 billion US dollars in market value.
On the foreign exchange market, the ruble continued to fall, while the US dollar remained in strong demand as the main reserve currency in times of crisis. The greenback appreciated against most other major currencies. The euro suffered as a result. It fell below $1.10 on Friday, hitting its lowest level since May 2020./bek/ck/jsl/he