Here’s how 6 months of war between Ukraine and Russia shook global financial markets
More than six months since Russia invaded Ukraine in what Moscow calls its “special military operation”, thousands have been killed, millions left homeless and the world has seen the worst East-West tensions since the Cold War.
It has also thrown global financial markets into severe turmoil, as shown in the charts below.
1/ RECESSION FEARS
Recessions now look all but certain in Europe as gas prices, critical for households and industry, have more than tripled since June alone on fears that Russia could cut supplies, which could lead to a energy rationing in some economies.
Yet the European Central Bank, Bank of England and other central banks are determined to crush the inflationary spiral that energy costs are fueling, even as higher interest rates are sure to further squeeze households and businesses struggling with rising costs.
GRAPH – Towards recession?
2/ GROWTH PAINS
Agricultural markets collapsed after the invasion, but have since proven remarkably flexible. Wheat and maize – major exports from Ukraine and Russia – have fallen after an initial price spike, while Moscow’s main source of income, oil, is now fetching less than at the start of the invasion.
GRAPH – Six months of the Ukrainian war
Soaring energy and food prices, coupled with post-pandemic supply chain strains, have pushed inflation rates around the world to levels not seen in the 1970s. many ramifications in bond markets, especially where borrowing costs have soared and default fears have mounted.
GRAPH – Inflation Palpitations
The euro has fallen more than 12% so far this year, more than in any comparable period since its introduction in 1999, reflecting the idea that further cuts in Russian gas supplies will hit major economies particularly hard. of the eurozone that depend on such as Germany and Italy.
GRAPH – The ransacked euro
5/ OUT OF GAS
Russian gas flows through major pipelines to Europe have fallen by around 75% since the start of the year, leading leading European politicians to accuse Moscow of militarizing its natural resources.
Russia has denied that the cuts are premeditated, but the fact that they are happening and that the EU was dependent on Russia for 40% of its gas before the invasion, boosted its price to 270 euros/MWh from less than 50 euros/MWh at this time last year. .
GRAPH – Russian gas pipeline supplies gas to Europe
CHART – UK Gas Price Futures
Germany and Italy’s dependence on Russia has made their stock markets one of the worst in the world. Those close to the fighting, including Poland and Hungary, also saw their stocks and currencies battered. The bonds of countries with high gas or wheat import bills have also been hit hard.
GRAPH – CEEC currencies crushed by the crisis
Chart – Underperformance of the German, Italian and CEE indices
7/ CHEMICALS AND AUTOMOTIVE PARTS
Shares of chemical companies have suffered some of the biggest declines since the invasion, as natural gas plays a key role in their manufacturing process. Auto parts makers have also been hit hard, partly because Russia was a major market for companies such as VW and Mercedes and partly because Ukraine and Russia have also been suppliers.
“European chemical companies have had a pretty torrid time,” said Mirabaud analyst William Mileham. “There have been production shutdowns and talk of possible gas rationing has hit their stock price hard recently.”
GRAPH – Chemical and auto parts makers hammered by Russia-Ukraine war
8/TIME OF VOLATILITY
Volatility gauges for markets, from stocks and bonds to oil and the euro-dollar exchange rate soared following the Feb. 24 invasion before a bumpy descent later. But they rose again this month as energy and recession worries rose again.
Chart – Volatility gauges burst
9/ LOWER RATINGS
The war has been mentioned as a factor in nearly 250 downgrades to S&P Global’s credit ratings or outlook since late February. Russian borrowers accounted for more than half of them, but rising energy and borrowing costs mean the impact will continue to spread more widely.
Ukraine defaulted because the war destroyed its economy and finances. The sanctions also pushed Russia into its first sovereign debt default in decades and left more than $25 billion of the country’s corporate debt unpaid.
“Russian companies have shown a very strong will to continue paying foreign creditors, even with the obstacles imposed on them by sanctions,” added Jeff Grills of Aegon Asset Management.
GRAPH – Credit rating moves linked to the fallout from the Russian-Ukrainian war
10/ COMPANY EXODUS
Major brands from Nike and Coca-Cola to IKEA and Apple are among more than 1,000 global companies that have left Russia or made public plans to scale back operations there, according to a list https://som.yale. edu/story/2022/over-1000-companies-have-curtailed-operations-russia-some-remain?company=shell&country= compiled by Yale researchers.
This represents billions of dollars in assets. But others have remained or maintained https://moralratingagency.org what they described as essential or unsellable parts of their business in Russia.
“We’ve never seen anything of this magnitude in economic history,” said Jeffrey Sonnenfeld, senior associate dean for leadership studies at Yale, who led the project.
GRAPH – Companies are withdrawing from Russia
By Mark Jones
(Additional reporting by Noah Browning and Nina Chestney in London, Danilo Masoni in Milan and Nerijus Adomaitis in Oslo; Editing by Tomasz Janowski)
(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)