Good morning and welcome to our ongoing coverage of the world economy, financial markets, the eurozone and the economy.
Markets are jittery today as fears of impending Russian military action in Ukraine mount, hitting stocks and pushing oil prices to seven-year highs.
Brent crude, the international oil benchmark, hit $96/barrel for the first time since September 2014 as geopolitical risks in Ukraine swept through global markets.
Oil prices soared as traders expected a Russian invasion of Ukraine to disrupt energy exports. This would create disruption at a time when the market is already tight, demand is increasing and supply is tight.
Such a supply shock would shake economies emerging from the pandemic and push inflation even higher, while the broader financial system could be shaken if sanctions are imposed on Russia.
ONEs Kyle Rodda from I G explained:
Markets are preparing for the risk of war in Europe and this is adding to the complex of issues currently causing uncertainty and volatility in global markets.
US reports on Friday suggested a Russian invasion of Ukraine could come as soon as this week – sooner than expected given the assumption that the Russians would avoid such a move before the end of the Beijing Olympics in order to protect the country Chinese to placate – with more reports today suggesting Wednesday could be the scheduled day.
From a humanitarian perspective, international relations experts suggest it could be catastrophic. Markets are concerned about the impact such a conflict will have on fragile energy markets, economic growth in Europe and the broader financial system if sanctions are imposed on Russia
Friday night’s US warning of the “very clear possibility” of a Russian invasion of Ukraine soon unsettled investors and hit stock markets.
As phone calls between Joe Biden and Vladimir Putin failed to defuse tensions over the weekend, risk sentiment is deteriorating. Stock markets across Asia-Pacific have fallen sharply, including Japan Nikkei has lost 2.2% and China’s CSI 300 Index is down over 1%.
European markets are expected to open lower, along with the UK FTSE 100 The index is currently expected to fall about 1% when the market opens at 8am in London.
German Chancellor Olaf Scholz is due to travel to Kiev today as Western governments step up diplomatic efforts to avert a Russian invasion of Ukraine.
On the eve of his departure, Scholz said any Russian attack would result in “tough sanctions that we have carefully prepared and that we can put into effect immediately.”
He said:
“(These trips are) about how we can find a way to secure peace in Europe,”
Scholz will then visit Moscow on Tuesday to make clear the economic costs of a Russian invasion of Ukraine.
Here is our latest update on the Ukraine crisis:
Investors are already nervous about inflation, with prices rising at their fastest pace in 40 years in the US and 30 years in the UK. This is expected to drive interest rates higher this year, with the US Federal Reserve expected to increase borrowing costs sevenfold in 2021.
The agenda
- 7 am GMT: China’s foreign direct investment data for January
- Noon GMT: India’s inflation rate for January
- 16:15 GMT: Speech by ECB President Christine Lagarde in the European Parliament on the 20th anniversary of the euro banknotes and coins
