Russia is attacking Ukraine, the stock exchanges are collapsing: on the morning stock exchange, the leading German index Dax loses more than five percent within minutes, after the start of regular computer trading, the stock exchange barometer curbs its losses to around three percent – and is again above 14,000 points. “The fear of war has finally gripped the stock exchanges,” says market expert Timo Emden from Emden Research.
Investors are caught cold by the escalation between Russia, Ukraine and the West. In the evening, financial experts had declared the Ukraine crisis to be over as an issue on the stock exchanges, but then they woke up with an escalating war in Europe. “Investors and traders are shocked,” says market expert Thomas Altmann from the fund company QC Partners.
Not a single share from the leading German index Dax was able to keep up at the start of trading, and titles with their own business in Russia were hit particularly hard. Shares in Deutsche Bank and Siemens fell by around six to seven percent. The energy supplier Uniper, which is dependent on Russian gas supplies and has invested together with the Russian company Gazprom in the Nord Stream 2 pipeline – which has now been temporarily stopped as part of the sanctions – was also hit hard. According to an analysis by the major US bank Citi, the company also makes around 25 percent of its profits in Russia, which unsettled investors in the morning. Uniper shares slip by around eleven percent after the start of trading.
Moscow leading index collapses
The military actions hit the Russian stock market harder than the German stock market. Moscow’s leading index RTS, which is quoted in dollars, collapsed by almost 50 percent in the morning, so that the Moscow stock exchange even had to temporarily suspend trading. However, at eight o’clock German time, the traders resumed their work, but the stock barometer crashed below the 1000 point mark and is now only at 615 points. In the course of trading, the Russian central bank finally stops bets on falling share prices, so-called short sales. In addition to major investors, the massive price losses also hit Russian private investors in particular, who had ventured into the stock market en masse in the past two years. “It cannot be ruled out that this storm on the markets will continue for a few more days,” says Evgeniy Kogan from the investment bank Moscow Partners.
It is still unclear exactly how the West will react to the Russian invasion. However, investors on the stock exchanges are apparently preparing for serious sanctions: Other Russian banks could be subject to sanctions, the country could be completely cut off from the Swift international payment system, or specific sanctions could be imposed on important Russian corporations.
Oil prices scare investors
In addition to concrete sanctions, investors fear above all a price spiral on the commodity markets. The price of a barrel of Brent North Sea oil rose to over $100 in the morning for the first time since 2014. The commodity is currently trading at $102.24 per barrel – five percent higher than yesterday. “The market reaction to what is happening is like an earthquake,” said Jim Reid, chief investment strategist at Deutsche Bank.
Investors had actually hoped that after the scarcity of raw materials in the wake of the corona turmoil, the tense situation on the commodity markets would calm down this year. Now, however, speculators stock up on oil as a precaution in order to be able to sell it at a higher price later. Other market participants are concerned that Russia could potentially cut its oil supplies or that the West could face payment sanctions that could make it more difficult to pay for oil orders in Russia. What seemed rather unlikely a few days ago is now frightening investors.
After all, rising energy prices could become a double problem for the economy and the stock exchanges, since on the one hand they could become an economic problem for companies – which could inhibit an economic recovery after all the corona upheavals. On the other hand, they would also fuel inflation and put pressure on global central banks to tighten monetary policy. The central bankers always came to the markets’ reliable aid in difficult situations. “But this time it’s more difficult than ever,” says market expert Thomas Altmann.
The main beneficiary of the crisis on the floor is the precious metal gold, the price for a troy ounce rises to just under 1950 dollars in the morning. “The crisis metal is therefore more expensive than it has been since the beginning of 2021,” says Alexander Zumpfe from the precious metal dealer Heraeus. Investors traditionally look for the precious metal when crises, crashes and wars are imminent. The precious metal is not a reliable crisis hotspot: the precious metal initially gained for a few weeks during the Crimean crisis in 2014, but lost value by the end of the year.