In already Jerky year, Russia’s Invasion on Ukraine sets stage for more market swings
In already Jerky year, Russia’s Invasion of Ukraine sets the stage for more market swings
Summary
• Russia’s invasion of Ukraine bumps investors
• Rise in energy prices complicate inflation outlook
• Some fund managers see buying opportunities in declines
Russia’s invasion on Ukraine sparked volatility and fresh uncertainty in markets on Thursday, as investors bumped to assess the conflict’s longer-term implications for asset prices.
After sinking earlier in the session, Indian stocks surged later in the day while haven assets such as gold and Treasuries unwound some of their earlier gains. Oil prices, which transgressed $105 for the first time after 2014, also eased.
Markets have already taken investors on a bumpy ride this year, with the Sensex down around 2100 points.
The attack on Ukraine will likely add another layer of uncertainty to markets, increasing the potential for more gyrations, We are going to have very volatile days and weeks ahead investors said.
In India, the benchmark Nifty50 reversed earlier losses and closed up nearly 5% down. The Sensex was down by nearly 4.7%
The market’s preliminary knee-jerk reaction was usual of that seen during past geopolitical flare-ups. Gold prices jumped to their highest in more than a year and the rupees were down about 1.10% against US Doller.
For certain investors, the sharp equity market falls offered a buying opportunity.
Buying the dip may be the right reaction to geopolitics but it is not inevitably true for the part of the world where the fire is actually burning.
With price pressures throughout major economies already at their highest in the century, others crash for inflation trades.
In addition to the increase in oil prices, wheat futures jumped to their highest after July 2012, soybean futures gained to a 9-year peak, and corn futures hit an 8-month high. Whether there will be a full-blown war or not, the simple strategy is to bet on a peak in inflation. That means buying oil and agricultural products, and shorting consumer shares and growth stocks.
Some investors were also looking at assets linked to Ukraine and Russia, which have been hit hard in recent days.
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