Markets Update Monday 28/02/2022 – The Cold Money War

Frankfurt – 28/02/2022

The Cold Money War

Uncertainty on the international stock markets remains high: Today was another turbulent day after the significant price losses last week. In February as a whole, the German benchmark index DAX plummeted by over six per cent. That was the biggest monthly drop in 16 months. First, speculation about a rapid turnaround in interest rates and then the war in Ukraine harmed stock markets worldwide.

Investors increasingly fear the economic consequences of the Russia-Ukraine crisis and the tightened global sanctions, which are now gradually turning into a new kind of Cold War.

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However, stockbrokers are far from giving up hope for a negotiated solution, which ultimately boosted the stock markets. Four days after the start of the Russian invasion, negotiators from both sides have held initial talks on a ceasefire. Initially, nothing was disclosed about the content. According to media reports, a second-round is planned for the coming days. The goal is an immediate ceasefire, and the withdrawal of Russian troops from Ukraine, the Ukrainian President’s office had stated before the talks.

US Markets at a glance

In the USA, volatile trading ultimately ended on a mixed note on Monday. The Dow Jones initially slipped more sharply into negative territory but was able to stem its losses late in the day and closed 0.53 per cent lower at 33,879.55 points. The tech index NASDAQ Composite was also initially in red territory, but here too, the mood improved considerably late in the day: the tech index even made it into the green territory and closed 0.41 per cent higher at 13,751.40 points.

Peace talks between Russia and Ukraine have ended without a tangible result. “We are travelling back to the capitals for consultations,” Ukrainian presidential adviser Mychaylo Podolyak told journalists on Monday after the meeting on the Belarus-Ukraine border. He did not give details. He said that both sides had identified several main issues on which “certain decisions” had to be made. The meeting lasted more than five hours. The delegation from Ukraine returned to Kyiv in the evening.

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As part of sanctions against Russia, several Russian banks were excluded from the international payment system SWIFT. However, as banking transactions are internationally interconnected, the measures are also likely to have consequences on the share prices of US banks. As a first example, Citigroup’s share plummeted by more than 4 per cent today. Goldman Sachs, JPMorgan and Morgan Stanley shares also posted significant losses. 

Far East Markets at a glance

The Asian leading markets moved only slightly and in different directions. In Tokyo, the Japanese benchmark index Nikkei was ultimately 0.19 per cent firmer at 26,526.82 points. Meanwhile, in mainland China, the Shanghai Composite climbed 0.32 per cent to 3,462.31 units, while the Hang Seng lost 0.24 per cent to 22,713.02 points in Hong Kong.

Investors continued to focus on the Russia-Ukraine war. In the meantime, the West has adopted comprehensive sanctions. 

European Markets at a glance

The European markets were weak on Monday. The EuroSTOXX 50 started trading with losses and continued to fall during the day. Most recently, losses of 1.17 per cent to 3,924.23 points were still on the scoreboard.

The DAX opened the session significantly lower and then continued to fall. In the afternoon, however, it was able to limit its losses and ended the session 0.73 per cent weaker at 14,461.02 points. Meanwhile, the TecDAX turned positive after starting the session in the red. At the end of the trading day, it was still up 1.43 per cent at 3,236.39 points.

The main reason for the heavy losses were the tough sanctions against Russia. The EU put its sanctions against the Russian central bank into effect on Monday night. It also excluded Russian financial institutions from the SWIFT banking communication network. Russia reacted to this with an increased alert of its armed forces. How hard these financial system sanctions will be for Russia, in the end, has to be seen since Russia is already plugged into other alternative systems. 

Forex, gold, oil and crypto

On the foreign exchange market, the euro made up ground after a weak start and was trading at 1.1206 dollars in the evening. In the morning, the common currency had again approached the multi-month low of last Thursday, when the euro had fallen to 1.1106 dollars, its lowest level since the middle of last year, due to the Russian attack on Ukraine. Meanwhile, the Russian national currency, the rouble, is in free fall following the increased sanctions imposed by the West. On Monday evening, one US dollar cost 104 roubles – about a quarter more than Friday. It did not help that the Russian central bank drastically increased the key interest rate by 10.5 percentage points to 20 per cent.

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On the other hand, the price spiral went up again in the commodity markets, and oil prices, in particular, rose strongly. The price of a North Sea Brent crude barrel climbed by around three per cent above the 100 dollar mark after falling below this level on Friday. The last price for Brent was 100.45 dollars, while WTI climbed to around 97 US dollars.

Gold trading was highly volatile again. At first, the precious metal was moving closer to the $1,930 mark before plummeting below $1,900 and finally closing at $1,906 per troy ounce. 

Again today, cryptocurrencies were in demand and moved up quickly during the US session. The overall market capitalisation rose close to $2 trillion, and Bitcoin ultimately gained 14.5 per cent to $43,150. Similarly, Ethereum, Solana and Binance Coin rose by around 11 per cent, while XRP added 7 per cent, and ADA grew by 12 per cent to $0.97. LUNA jumped by over 22 per cent to $88.55, overtaking ADA and SOL in the charts.

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Economic data 

A decline in the value of the rouble

Russian President Vladimir Putin has banned his citizens from transferring foreign currency abroad. According to a decree by Russian President Vladimir Putin published on the Kremlin website on Monday, Debts abroad may no longer be settled. Money may also no longer be transferred to accounts opened abroad. Foreign exchange is foreign currency. From Russia’s point of view, this means the US dollar or the euro, for example.

The decree will come into force this Tuesday. Apparently, this is to prevent a further decline in the value of the Russian rouble.

This is a reaction to the unfriendly measures of the USA and its allies, writes the Kremlin. After Russia attacked Ukraine, the EU countries, the USA and other Western states have imposed numerous sanctions. One of the most severe penalties is excluding individual Russian banks from the SWIFT financial communication system. Russian oligarchs’ bank accounts are also sanctioned. 

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