By Swann Collins, investor, writer and consultant in international affairs. Eurasia Business News – March 9, 2022
Western stock markets rebounded strongly on Wednesday, after several sessions of severe decline that led investors to take advantage of cheap purchases, despite still strong fears about the economic consequences of the Russian-Ukrainian conflict.
Frankfurt’s stock index, the Dax, climbed 7.92%. In Paris, the French stock index CAC 40 rose 7.13% and in Milan, the FTSE MIB rose 6.94%. For Frankfurt and Milan, this is the largest daily increase since March 2020. London took 2.79%. In Zurich, the SMI rebounded 3.95%.
In New York, the indexes posted their best session of the year: the Dow Jones gained 2.00% while the Nasdaq gained +3.59% and the S&P 500 grew by 2.57%.
This rebound would result from the comments by the Russian Foreign Ministry which said it would be better if the Russia’s goals in Ukraine were achieved through talks. It seems that the Kremlin would prefer to negotiate and implement a ceasefire.
The Russian Foreign Affairs Minister Sergei Lavrov will take part in a diplomatic forum in Antalya on March 10. A meeting with the Ukrainian Foreign Affairs minister Dmytro Kuleba with the participation of Turkish Foreign Minister Mevlut Cavusoglu is scheduled.
However, the geopolitical situation can change every day, and Western sanctions are here to stay, disrupting world supply chains as Russia is a large exporter of oil, gas and raw materials. Oil prices are still high and will hamper any recovery in stock markets.
Ukraine is still facing a Russian military operation on its territory and the Western sanctions imposed on Russia are also pushing the country to the brink of default on its public debt (only 20% of the Russia’s GDP), while many Western companies have already decided to cut their trade relations with the country.
The latest shock measure: an American and British embargo on Russian hydrocarbons, announced on March 8, raises fears of a new surge in energy prices, when high inflation already pressure European and US economies.
The economic recovery in post-pandemic activity could be replaced by a period of stagflation: a slowdown in growth combined with stubborn inflation, currently fuelled by soaring commodity prices, led by oil and gas prices surge.
However, on March 9 stocks and the euro currency rose, while oil prices fell, with Crude Oil WTI losing 11.41% to $ 109.58 per barrel for April futures. The barrel of North Sea Brent for delivery in May dropped 13.15%, to finish at $ 111.14.
Oil prices have fallen sharply, with investors ignoring the decline in U.S. crude reserves to focus on the war in Ukraine and the diminished prospect of a European embargo on Russian crude oil. European economies are heavily dependent on Russian oil and gas. In France, when a presidential election is to be held next month, higher oil prices have fuelled social discontent among citizens. Inflation of French consumer prices may cost the election to the current president Emmanuel Macron and his allies.
Bitcoin was up 8.27% to $41,955 on March 9, 10:39 pm UTC, after US President Joe Biden on Wednesday launched work for a future “digital dollar”.
On the equity side, banks, which have fallen sharply since the beginning of the crisis, benefited from the rebound in stock markets on Wednesday.
After losing half of its value, Austria’s Raiffeisen’s stock rose 17.32%. Societe Generale climbed 11.53% Commerzbank by 11.17% and Unicredit by 11.68%. In New York, Wells Fargo was up 5.85% around 17:05 GMT.
Airlines experienced rebounds of the same magnitude in Europe: Easyjet +12.57%, IAG +11.03% or Lufthansa +12.02% and United Airlines +8.27%.
Defense sector values have given up a small part of their gains from the previous days. French Thales lost 4.24%, and Hensoldt 5.06%. British BAE Systems (-4.22%) finished at the bottom of the London stock market.
Gold prices fell 2% and reached 1,991.30 per troy ounce at the closure on March 09, 2022, 04:59 pm NY Time.
Read also : How to invest in gold
The yellow metal has always been a great hedge against inflation because it rises in price when the cost of living standards rises. Gold can store value efficiently, when paper currency loses purchasing power because of inflation.
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© Copyright 2022 – Swann Collins, investor, writer and consultant in international affairs.