Markets Update Monday 07/03/2022 – Downward Spiral

Frankfurt – 07/03/2022

Downward Spiral

The conflict in Ukraine and the drastic rise in energy prices have also hit Wall Street today. Given the continuing conflict in Ukraine and further increases in energy prices, share prices in the USA came under pressure again at the beginning of the week. For the first time in a long time, the leading US stock indices performed as poorly as the European markets.

The overall situation was aggravated in the evening. For the first time since the beginning of the conflict against Ukraine, Russia has openly threatened to stop gas supplies through the Nord Stream 1 Baltic Sea pipeline. “We have the full right to make a ‘mirror’ decision and to impose an embargo on the transit of gas through the Nord Stream 1 pipeline, which today has a maximum capacity utilisation of 100 per cent,” said Deputy Head of Government Alexander Novak on state television on Monday evening.

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In particular, shares from the financial sector came under pressure on Monday. American Express lost 7.9 per cent and Visa 4.8 per cent. Because of the sharply rising energy prices, consumers could reduce consumer spending, putting a strain on the major credit card operators. Securities of banks such as Wells Fargo and Bank of America also came under pressure, while shares in the travel industry also felt the prospect of slacker consumers due to rising oil and gas prices.

US Markets at a glance

The Dow Jones ended the first trading day of the week with a loss of 2.38 per cent at 32,813.56 points. The tech index NASDAQ Composite also slipped 3.62 per cent to 12,830.96 points.

Russia is continuing its war in Ukraine with unabated vigour. The price rally on the commodity markets also caused losses on the US stock exchanges – earlier, the rise in oil prices had already put pressure on the trading centres in Asia and Europe. 

Among investors, fears of stagflation due to the oil price shock were rising and causing uncertainty. After US Secretary of State Anthony Blinken brought further punitive measures against Russia into play, oil prices continued to rise strongly. Washington is consulting with European allies about a possible import ban on oil from Russia, and the discussions were not yet over in the evening.

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Far East Markets at a glance

The Asian stock markets plummeted at the beginning of the week.

In Tokyo, the Japanese benchmark index Nikkei closed 2.94 per cent lower at 25,221.41 points. On the Chinese mainland, the Shanghai Composite lost 2.17 per cent to 3,372.86 points by the end of trading, while in Hong Kong, the Hang Seng fell 3.87 per cent to 21,057.63 points.

Concerns about a possible oil import ban from Russia sent stock markets in the Far East tumbling on Monday. US Secretary of State Antony Blinken had brought new punitive measures against Moscow into play: “We are talking with our European partners and allies to explore in a coordinated way the prospect of banning imports of Russian oil,” Blinken said.

European Markets at a glance

The European markets continued to move in the loss zone on Monday. The EuroSTOXX 50 already dropped initially and then continued to fall significantly. Intraday, it was able to recover its losses at times but then closed 1.23 per cent lower at 3,512.22 units.

The DAX slumped by more than three per cent at the start and then continued to fall. By the end of Monday trading, it had fallen back again and was ultimately 1.98 per cent lower at 12,834.65 points. The TecDAX fell by around 1.5 per cent at the start of trading. Initially, the TecDAX also extended its losses considerably. In the day, it then temporarily managed to jump into positive territory before slipping back into the red territory and finally exiting trading at minus 1.36 per cent at 2,996.76 points.

European stock markets were under pressure on Monday due to concerns about the escalating war in Ukraine and its possible economic consequences. On Monday morning, a potential import ban on oil from Russia, which drove oil prices to their highest level since 2008, weighed on sentiment.

Forex, gold, oil and crypto

The US dollar in particular and the Swiss franc were in demand on the forex market, which is traditionally not unusual in times of crisis. The euro also fluctuated strongly against the greenback on Monday, falling to 1.0807 dollars. Meanwhile, the Swiss franc exchange rate to the euro climbed to its highest level in more than seven years. For the first time since the Swiss central bank (SNB) abandoned the euro peg, the Swiss main export currency cost less than one franc. In the course, 1.0030 francs were paid for one euro. Besides the franc and the dollar, investors are also turning to the yellow precious metal gold as the ultimate “safe haven”. 

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Discussions about an import ban on oil from Russia drove oil prices on Monday to their highest level since 2008. The situation eased somewhat during the day. The price for a barrel of Brent rose by 6.24 US dollars to 124.35 US dollars. During the night, the Brent price had risen to 139.13 dollars, its highest level since 2008. In the summer of 2008, crude prices had reached a record high of almost 150 dollars. Since Russia invaded Ukraine, the Brent price has risen by around a third, having already risen in the weeks before. Since the end of 2021, the price has risen by around two thirds.

The price of gold was already above $2,000 at its high for the day and was still trading at $1.992 per troy ounce at the close of trading.

Cryptocurrencies are currently caught between their ambiguous state as risk assets and inflation hedges. Because of this, digital assets continue to trade sideways today, with Bitcoin losing 1 per cent to $38,000, while Ethereum fell 1.3 per cent to $2,515. Cardano lost 2.5 per cent to $0.80, while XRP was up 0.8 per cent to $0.7250. 

Corporate and world economic news

Economic data

Price-adjusted turnover in the German manufacturing sector rose again in January. According to the Federal Statistical Office, it increased by 1.8 per cent compared to the previous month. The increase of 0.2 per cent reported for December was also revised to 0.7 per cent. 

Turnover in the German retail sector rose solidly in January. Based on preliminary data, as the Federal Statistical Office announced, sales after deducting inflation increased by 2.0 per cent compared to the previous month. 

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