How the Ukraine-Russia War Is Disrupting Global Financial Markets

MARK JONES

LONDON (Reuters) – Thousands of people have been killed in the more than six months since Russia invaded Ukraine in what Moscow called a “special military operation”, Millions were left homeless, and the world witnessed the worst East-West tensions since the Cold War.

It has also thrown global financial markets into serious turmoil, as shown in the chart below.

1/Recession Fears

Fears that Russia will cut supplies could lead to energy rationing in some economies, vital for households and industry since June alone Gas prices in Europe are almost certain to be in recession.

Yet the European Central Bank, Bank of England and other central banks are determined to crush inflation that is being fuelled by rising energy costs, even if higher interest rates are bound to It will further squeeze the plight of households and businesses. Costs go up.

Graphic – recession?

https://inew.news/wp-content/uploads/2022/08/localimages/chart.png6305800cc9e26.png

2/Growing Pains

The agricultural market changed dramatically after the invasion, but has since proved remarkably flexible. Wheat and corn – the main exports of Ukraine and Russia – quickly retreated after an initial surge in prices, while oil, Moscow’s main source of income, is now priced below where it was at the start of the invasion.

Graphic – Six months of the Ukrainian war

https://fingfx.thomsonreuters.com/gfx/mkt/mypmneyobvr/Pasted% 20picture%201661177882724.png

3/INFLATION PALPITATIONS

Energy and food prices soar, plus postal-pandemic supply chain tensions of the s level. That has broad implications for bond markets, especially as borrowing costs surge and default fears deepen.

Graphics – Inflation Palpitations

https://fingfx.thomsonreuters.com/gfx/mkt/lgvdwybdwpo/Pasted%10image%201661262372473.png

4/EURO TRASHED

EURO fell more than % more so far this year than in any comparable period since launch , reflecting further cuts to Russia The gas supply will hit the major euro zone economies that depend on it, such as Germany and Italy, particularly hard.

Graphic – Euro trash

https://fingfx.thomsonreuters.com/gfx/mkt/mypmnerqqvr/Pasted%20picture%201661248285941.png

5/OUT OF GAS

Russia’s gas flow to Europe via main pipeline has dropped 40% since the beginning of the year has led senior European politicians to accuse Moscow of weaponizing its natural resources.

Russia denies that the cuts were premeditated, but the truth is they are happening and the EU is dependent on Russia 12% of the gas that had pushed its price up to before the invasion EUR/MWh this time last year was lower than 50 EUR/MWh watt hours.

Graphic – Pipeline gas supply from Russia to Europe

https://graphics.reuters.com/UKRAINE-CRSIS/RUSSIA/movangrozpa/ chart.png

GRAPHIC – UK Gas Price Futures

https://fingfx.thomsonreuters.com/gfx/mkt/znpnergmavl/Pasted %20picture%201661255390184.png

6/UNDERPERFORMERS

Germany and Italy’s dependence on Russia makes their stock markets the world’s worst performers One of the stock markets. Those close to fighting, including Poland and Hungary, also saw their

stocks and currencies take a hit. Bonds of countries with high gas or wheat import bills also took a hit.

Chart – CEE currencies crushed by crisis

https://fingfx.thomsonreuters.com/gfx/mkt/dwpkrwmwevm/Pasted %20picture%201661269761912. png

Graphics – Germany, Italy and CEE indices underperformed

https://fingfx.thomsonreuters.com/gfx/mkt /byvrjydzqve/Paste%20Picture%201661248285941.png

7/CHEMICALS AND CAR PARTS

Biggest drop since invasion , because natural gas plays a key role in its manufacture. Auto parts makers have also been hit hard, partly because Russia is a key market for the likes of Volkswagen and Mercedes, and partly because Ukraine and Russia are also suppliers.

“It’s a bit of a bloody time for European chemical companies,” said Mirabald equity analyst William Millam. “The recent production shutdown and discussions around potential gas rationing have hit their shares hard.”

Graphic – Chemicals and auto parts makers hit by Russia, Ukraine The Wounds of War

https://inew.news/wp-content/uploads/2022/08/localimages/Pasted-25000image-25201661262372473.png

8/VOLATILE TIMES

A measure of volatility in markets ranging from stocks and bonds to oil and oil, the EUR/USD exchange rate in February Soared after the invasion, followed by a bumpy ride down. But they surged again this month as energy and recession fears intensified again.

Graph – Volatility Meter Burst

https://fingfx.thomsonreuters.com/gfx/mkt/zgvomgdxgvd/Pasted%20image%201661266750960. png

9/FALLING RATINGS

almost 201661272612465 mention war as a factor S&P Global (NYSE: SPGI) has downgraded its credit rating or outlook since late February. Russian borrowers account for more than half of them, but rising energy and borrowing costs mean the impact will continue to grow.

Ukraine defaulted because the war wrecked its economy and finances. The sanctions also plunged Russia into its first sovereign debt default in decades and left 25 $BILLION

“Russian companies have shown a very strong willingness to continue to pay their foreign creditors, even as sanctions create hurdles for them,” Aegon’s Jeff Grills (NYSE: AEG) Asset management was added, though.

Chart – Changes in credit ratings related to the aftermath of the Russia-Ukraine war

https://fingfx.thomsonreuters.com/gfx/mkt /zgpomgddqpd/Pasted%20image%201661265033239.png

10/CORPORATE EXODUS

Big brands from