Market Update February Monday 21st 2022
Market volatility spikes as tensions between Russian and Ukraine ratchet up
Concerns over inflation took a back seat this week, as markets focused on the build-up of Russian troops and weapons on the Ukrainian border, with President Biden warning that a conflict could start in a matter of days. Markets have oscillated up and down whilst investors have tried to second guess how serious the threat from President Putin is, or whether it remains chiefly a bargaining tool to prevent Ukraine from slipping towards the European Union and membership of NATO (North Atlantic Treaty Organisation).
As of 12pm on Friday, London time, US equities had fallen 0.9% over the week, whilst US technology stocks dropped 0.5%. Since the start of the year, the US market has now lost just over 8%, with the US technology sector having fallen by just over 12%. European equities fell 1.0% over the week, whilst the UK market fell 1.5%. Japanese stocks lost 2.0%, whilst the Australian market proved to be defensive, rising by 0.1%, helped by a rally in the gold price, whilst emerging markets fell by 0.5%.
US government bonds fall
US government bonds have fallen in value from the start of the week, despite the ratcheting up of concerns by western politicians and the media over a potential invasion of Ukraine by the Russians. The yield on 10-year US Treasuries, which moves inversely to price, is now trading at 1.97%, having started the week at 1.93%, whilst in intraweek trading, it touched 2.06%. It has been a different story for German Bunds and UK gilts which have both rallied in price, now trading at a yield of 0.22% and 1.44% respectively. This is despite the UK revealing on Friday retail sales figures that exceeded forecasts, posting the largest monthly increase since the reopening of the high street last April. Sales volumes rose by 1.7% in January, excluding car fuel, against forecasts of a 1.1% gain, increasing the case for further interest rate rises.
Gold’s safe-haven status shines through
Gold’s safe-haven status has also shone through, as the precious metal advanced by 2.8%, currently priced at $1,893 an ounce. Meanwhile, Brent crude, having touched a seven-year high on Monday of $96.4 a barrel, is now trading at $91.2, down by 3.5% over the week, dragging equity stocks down with it.