04 March 2022
4 mins clock icon

Ukraine conflict driving market swings

By Daniel Richards

  • The conflict in Ukraine continues to drive wild swings in markets, with the tone mostly one of risk-of sentiment yesterday as the crisis showed no signs of abating and sanctions against Russia continued to pile up. Commodity prices are surging with the biggest weekly gain in half a century, while European natural gas prices are at record highs, posing significant upside risks to inflation, and equity markets sold off. The White House announced a series of sanctions against a number of wealthy Russians and their families yesterday, similar to moves seen in the EU and UK. Meanwhile, an increasing number of private companies in a wide range of industries continue to cut their dealings with Russia.
  • Jerome Powell was speaking again yesterday, this time to the Senate Banking Committee. His comments largely echoed those he made to the House Financial Services Committee the previous day, recommitting to the Fed’s planned rate hikes but acknowledging the threat posed by the Ukraine conflict and pledging to move carefully.
  • US initial jobless claims were 215,000 in the week to February 26, coming in below consensus projections of 225,000 and lower than the 233,000 figure recorded the previous week. This is further evidence of a robust labour market ahead of this afternoon’s NFP report, following on from the ADP report released yesterday.
  • Turkish CPI inflation accelerated to a two-decade high of 54.4% y/y in February, up from 48.7% the previous month and above expectations of 52.5%. Prices were 4.8% higher than the previous month, compared to the consensus prediction of 3.8%. The monthly gain was a slowdown from the 11.1% m/m recorded in January, but price pressures in March look set to remain salient given the recent spike in energy and food prices and the fact that PPI inflation came in at 105.0% last month. The next central bank decision is scheduled for March 17, but a hike remains unlikely as the authorities remain committed to lower interest rates.

Today’s Economic Data and Events

11:45 France industrial production, January, % m/m. Forecast: 0.5%

17:30 US non-farm payrolls, February. Forecast: 418,000

17:30 US unemployment rate, February. Forecast: 3.9%

Fixed Income

  • US Treasuries remain volatile with a surge in early trading this morning on news that Russian forces have attacked a nuclear power station in Ukraine. Yields on the 2yr UST fell to as low as 1.40%, a drop of around 15bps in around one hour of trading while the 10yr fell from 1.85% to less than 1.7% in the same period. Both have since recovered but are down around 4bps each on their closes yesterday of 1.53% and 1.8405% respectively.
  • European markets closed relatively quiet overnight although that disguised some relatively wide moves. The 2yr Schatz settled at a yield of -0.642% and the 10yr bund at 0.016%. In the gilt market the 2yr closed up 5bps at 1.117% while the 10yr added almost 4bps to 1.296%.
  • Emerging market bonds remain fixated on the war in Eastern Europe, showing no systemic response. A broad index of USD-denominated EM bonds rose marginally overnight while local currency performance was more scatter-shot. South African 10yr yields fell almost 3bps to 9.95% while yields across emerging Europe were higher.


  • The dollar moved higher against majors overnight with both EURUSD and GBPUSD drifting lower. EURUSD settled at 1.1066, down almost 0.5%, and is extending losses this morning on news that Russian forces are attacking a nuclear power station in Ukraine. GBPUSD fell 0.4% overnight to 1.3348 and is roughly flat this morning. USDJPY is proving to be a marginal safe haven at best with levels holding around the 115.40-50 range.
  • In commodity currencies USDCAD was the outlier with a gain of 0.4% overnight as oil markets swung wildly. The pair closed at 1.2681 and is nudging higher in early trade today. AUDUSD managed a gain of more than 0.4% to 0.7329 while NZDUSD added a bit less than 0.2% to 0.68 figure.


  • After a relatively strong session in Asia where the Shanghai Composite lost -0.1% but most other indices gained (the Nikkei added 0.7% and the Hang Seng 1.6%), shares in the West came under pressure as the conflict in Ukraine showed no signs of imminent resolution.
  • In Europe, the Moscow Stock Exchange remained closed as it has been all week, but the London Stock Exchange suspended the listing of 27 Russian firms. At the close, the FTSE 100 had lost -2.6%, one of the day’s biggest drops. The CAC lost -1.8% and the DAX -2.2%. In the US, the Dow Jones the S&P 500 and the NASDAQ lost -0.3%, -0.5% and -1.6% respectively.
  • By contrast, local equity markets had a positive session, as the DFM added 0.4%, the ADX 0.7% and the Tadawul 0.8%.  


  • Oil prices traded all over the place overnight. Brent futures came within sight of USD 120/b, missing the level by just USD 0.16/b and pushing up as much as 6.9% on the day only to end lower by 2.2% at USD 110.46/b. Currently they are pushing higher by another 2% at USD 112.79/b. Likewise in WTI, prices had rallied as much as 5.4% to USD 116.57/b mid-day before fading those gains and falling nearly 3% on the close to USD 107.67/b.
  • The head of the International Energy Agency expressed his disappointment that OPEC+ did not increase production at its meeting earlier this week. At the same time the head of the IAEA, the UN’s atomic power monitoring agency, will visit Iran later this week which could herald the endgame of negotiations for a resumption of the JCPOA.

Click here to download charts and tables



Written By

Daniel Richards Senior Economist

There was an error during your feedback!

Your feedback is valuable to us and will help us improve.

Daniel Richards

Related Articles

Subscribe to our newsletter and stay updated on the markets

There was an error during your newsletter subscription!

Please try again to stay updated with all the latest financial news and valuable insights.

Thank you for newsletter subscription!

To stay updated with all the latest financial news and valuable insights.