Closing summary
The week has ended on a calmer note in financial markets, even as Russian troops advance on the Ukrainian capital after yesterday’s full-scale invasion of the country, which took markets by surprise.
European stocks are pushing higher: the UK’s FTSE 100 index in London is 260 points, or 3.6%, ahead at 7,467. Germany’s Dax and France’s CAC have both gained about 2.9% while Italy’s FTSE MiB is 3.4% ahead, following heavy losses yesterday.
The London-listed Russian steel and mining group Evraz is still the top FTSE 100 riser, up 20% after heavy losses in recent days. It paid out a $1.55bn dividend to shareholders, including $450m to 29% shareholder Roman Abramovich after profits trebled, but warned that future profits could be affected by economic sanctions aimed at the Kremlin and its allies.
On Wall Street, the Nasdaq has slipped 0.5% (after yesterday’s strong gain of over 3%), the S&P 500 has edged 0.2% higher and the Dow Jones is 0.8% higher.
Russian stocks in Moscow have also staged a comeback after Thursday’s invasion triggered record losses, with the benchmark rouble-based Moex index rising 16.7% while the dollar-based RTS index is 23% ahead. Russian government bonds also recovered after yesterday’s sell-off.
The rouble has recovered to 83.5 against the dollar, up 2%, and to 93.7 against the euro, up 1.6%. Yesterday it slumped to a record low of 89.60 against the dollar.
Oil and gas prices have retreated. Brent crude, the global oil benchmark, has fallen below $100 a barrel (after topping $105 for the first time since August 2014 yesterday) and is trading 1.7% lower at $97.21 a barrel, while US light crude is at $91.75 a barrel, a 1.1% drop.
The benchmark British natural gas contract dropped 29% to 229p per therm today while the Dutch benchmark contract fell nearly 20% to €108 per megawatt hour, following gains of more than 40% on Thursday.
Gold rose to 17-month highs this week amid a flight to safety from which the dollar also benefited while the pound fell sharply yesterday.
Thank you for reading. Have a great weekend! We’ll be back next week. - JK
Updated
Turner says that the Swedish krona, which is “close to the action” (geographically) and with a dovish central bank, has been one of the worst performers this week, along with the Polish zloty, Hungarian forint and Czech koruna. Euro and sterling also underperformed, with the pound falling more than 1% against the dollar yesterday.
There has been a flight to safe-haven currencies like the US dollar. He notes that the US is far less exposed to Russia in terms of trade ties than Europe. There’s also less of a debate about whether the Federal Reserve’s plans for rate hikes will be affected by the war in Ukraine.
Finally, the Chinese renminbi is “one of the standout performances” and lived up to its reputation as a world reserve currency. Turner says traditionally, safe-haven currencies are backed by countries’ large trade surpluses and “that is certainly the case for China at the moment”.
He predicted further weakening in the Russian rouble:
The rouble has to stay soft in the current environment.
