Thursday, January 27

Uncertainty over Ukraine weighs on stock markets


Although without substantial crashes, uncertainty begins to take over the ‘parquetsbecause of the tensions between USA, NATO and Russia regarding a possible war or invasion of Ukraine. The Ibex 35, the main indicator of the Spanish stock market, has dropped 1.36%, to 8,694.700 points. To the doubts that come from geopolitics are added the fears of an imminent rise in interest rates due to escalating inflation. The losses have also been imposed on Wall Street as the day progresses.

With this downward stumble, the Ibex 35 has put an end to a bullish streak that lasted for the last four weeks. Thus, to find such a red-tinted weekly accumulation, one had to go back to the first days of December, when the index fell by a broader 1.9%. The fear that the discrepancies between Russia and Ukraine could lead to a war has increased the volatility of a day marked by the expiration of the future.

The evolution of the Spanish selective has been marked by the rise in the yield of the bonds, the escalation experienced by the price of oil, to 2014 highs; high inflation and increased tension in Ukraine. One of the sources of doubt is fixed income. The fear of investors that inflation, which both in Spain is at levels of three decades ago and in the US, four decades ago, heralds a much more agile withdrawal of stimuli than what the central banks have so far contemplated in their roadmaps. All this caused a significant increase in the interest rates of many sovereign bonds, which also spread to other debt papers and ended up making a dent in the stock markets.

The German 10-year bond (‘bund’) is the one that has most reflected this evolution. In just three sessions it has gone from posting positive returns for the first time since May 2019 to falling to -0.065%. These decreases are transferred to other references such as the Spanish debt maturing in 2032, which ends the week at 0.638%, without changes compared to the previous Friday.

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The geopolitical tension over Ukraine has marked the week due to the rise in gas and oil prices. The rise in crude oil coupled with the production cuts of OPEC +, which would not be increasing production at the agreed rate, are factors that also generate nerves in investors.

Some business data did not help calm things down either. Thus, Siemens Gamesa has been clearly a negative protagonist, with a 14% drop after announcing a new ‘profit warning’ the night before. The annual balances of the listed companies that have been quicker to publish their Closing accounts for 2021. Sales were repeated on the other side of the Atlantic. The punishment suffered by technology companies again takes its toll on the Nasdaq, which includes the main companies in this sector. The disappointing results of Netflix and the regulatory tightening planned by the US Senate were the last straw for an index that fell by more than 10% in the year.



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