Global markets experience heightened volatility after Russia’s invasion of Ukraine Markets sentiment is driven by fears for how the war will develop, and the impact on energy prices, commodities.
Technology lower, while rotation into value continues
The rotation from growth into value persisted amid growing volatility. Technology was lower overall, despite some strong days. High intra-day volatility continued throughout the month and particularly following the Russian invasion of Ukraine on 24th February. Aside from the knee-jerk reaction to this event, economic data was generally supportive. Despite CPI inflation rising to 7.5%, improving house prices, consumer spending, and 4% unemployment, coupled with expected record earnings growth of 8.7%, helped to cushion the US market from the shocks being felt across the world from the Ukraine situation. Down -3.1% (US 500)
Exposure to Russia and Ukraine weighing on the markets
The worst performing of the major markets, being shunned by investors nervous about the dependence of Europe on Russian oil and gas, and the possible spill-over from the conflict in Ukraine. As in January, EU stocks began the month well, with a 1% rally. Economic indicators remained robust, with the composite PMI up to 55.8 from 52.3 in January, and a rebound in the tourism industry, following the easing of many COVID restrictions. However, sanctions imposed on Russia, and the suspension of approval of Nord Stream 2 by Germany weighed heavily on EU shares. Down -3.4% (Euro 600 Index)
FTSE 100 holding firm
Returns were dominated again by large-cap companies, with the FTSE 100 largely flat. Continuing falls were seen, however, in the mid and small-cap indices, which were both down by more than 3%. The All Share Index, which is dominated by the FTSE 100, sustained only a modest fall during the month, as the UK market has high exposure to oil and resources stocks, which continued to be driven higher by events in Ukraine. The UK market continues to be the best of the major equity markets so far this year. Down -0.8% (UK All Share)
Fell on the prospect of higher commodity prices
Although falls in Japan were contained, the wider Asian region saw a larger decline, driven by falls in China, Hong Kong and India, where sentiment was hit by the war in Ukraine. Malaysia, Indonesia and Thailand recorded gains for the month, but these were more than offset by the falls seen in the larger markets, where a combination of investor nerves and higher commodity prices drove shares lower. China, seen as Russia’s main supporter, abstained from voting on the UN resolution to tell Russia to stop its invasion, but has not joined in with sanctions. Down -2.1% (Asia Index)
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Mahfooz (Maz) ShamsuddinDirector & Chief Information Officer