Panic start to the week

European markets entered bear market territory at the start of the week as panic set in at the open in response to reports of the US looking to impose a ban on imported Russian oil.

To make matters worse, the reports appeared to suggest Europe is considering similar action as well which would be a monumental blow for Russian producers and the economy. It would also be a massive problem for Europe as there isn’t exactly an abundance of alternatives out there right now.

The initial reports sent oil prices soaring, with Brent crude almost touching USD 140 a barrel on the open, which in turn sent equity markets spiralling lower. It’s this kind of event risk that investors fear each Friday as they trigger enormous knee-jerk reactions on the open, big gaps and are usually exacerbated compared to what would be seen during the week.

And that’s exactly what we’ve seen today. As the dust has settled, fear of European bans on Russian oil – and potential retaliation or follow-up moves in gas or other commodities – has subsided. That has been helped by comments from Germany’s Finance Minister, Christian Lindner, stating that the country is against any push to stop Russian oil and gas imports.

Over the course of the morning, we’ve seen initial moves pared quite considerably. Europe is now relatively flat, as are US futures, and sentiment will continue to be dictated by the constant flow of headlines relating to the invasion. For example, Russia has offered an immediate end to the invasion if Ukraine will amend its constitution and reject claims to enter any bloc, recognise Crimea as Russian, and Donetsk and Lugansk as independent states. That doesn’t exactly fill me with hope.

Bitcoin realigns with risk assets

Bitcoin was doing very well last week on the back of reports of cryptos benefiting from those seeking to avoid sanctions or protect cash in these unstable times in Eastern Europe. We saw it de-link to an extent from risky assets that it had been highly aligned to so far this year. But that doesn’t appear to have lasted and the risk-aversion that swept through the markets late last week and early this appears to have taken bitcoin along for the ride. It’s broken back below USD 40,000 after looking likely to break above USD 45,500 at times last week and now looks vulnerable to further bouts of risk-aversion, once more.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

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