tension in eastern europe
The clash between the NATO countries and Moscow is the main concern of investors and the markets fit the fears
When it seemed that nothing could worry the markets more than the withdrawal of stimuli, the rate hikes and the central banks -with the US Federal Reserve in the lead-, the escalation of tension in Ukraine has once again surprised investors and has returned the fear in the main European stock markets, which face a Monday with significant falls.
In the case of Ibex 35, the declines in the early hours of the morning are close to 1.9%, in line with the Dax from Frankfurt or the Cac 40 of Pars, which fell by 1.7%, and somewhat behind the Ftse Mib de Miln, which is left more than 2.5% also influenced by the political instability before the presidential elections that the country faces.
In the Spanish selective, almost all values reflect this concern with red in their actions. only Telefnica, Almirall Y Naturgy exceed noon with advances in their titles, compared to declines that exceed 6% in cases such as that of ArcelorMittal (-6.5%) and Acerinox.
The confrontation between Russia and Ukraine in Eastern Europe has introduced a new risk factor for markets that were already facing major challenges in 2022. Analysts agree, however, that the clash between the NATO countries and Moscow has prevailed over whatever uncertainty there was up to now and has positioned as the main concernNo, also from the economic point of view. Much more considering that no one dares to predict what will happen in the next few days.
“I don’t think the markets can assess what can happen in these kinds of events. The result is just binary at a very simplistic level (Russia invades or not), but even that raises the question of what the markets should respond to.” points Chris Iggo, THAT IS core investments of the investment fund manager AXA IM. “Of course, safe assets would do very well, equities would sink due to risks to economic growth, and the dollar would soar against the euro because a war in Ukraine would be a very immediate practical problem for Europe (refugees, higher natural gas prices, the need for a united response by EU nations.) But things would get complicated very quickly in terms of the Western response, how brutal the conflict would become, if Belarus entered in the conflict and what sanctions or financial and economic actions both sides would take,” he adds.
In Bankinter They contemplate three possible scenarios, as things stand at this point. A “good” scenario that it would imply “pacification through diplomacy. A rebound in the stock markets, although its strength would be conditioned by what the Fed says on Wednesday”; a “bad” scenario, which would mean an “invasion light, from east and south, but without isolating the three Baltic republics from Poland by invading from Belarus to connect Kaliningrad with the rest of Russia. Depending on the extent of the damage and how long it takes for the situation to stabilize (i.e., end of military action), how brief or prolonged stock market drops will be”; and a “terrible” scenario, which would imply all of the above and, in addition, the isolation of the 3 Baltic republics. “This is the least likely scenario and the only one that would force us to make a resounding change in our investment strategy,” they point out.
In the event that the “bad scenario” takes place, the entity’s Analysis department considers that the stock markets, “and especially technology”, would suffer until the situation stabilizes. “The Fed will probably postpone any tightening (tapering slower, rate hikes later and no allusion to its balance sheet), as well as the BoE (which would no longer raise rates on February 3, as now discounted)”.
crashes in bitcoin
But the stock markets are not the only ones suffering from investors’ doubts. Also the cryptocurrencies, with bitcoin in the lead, try to fit in the last sessions the doubts and fears of the investors.
The clearest sign is found in bitcoin itself, which assumes a collapse of over 6%, which currently places it below 34,000 dollars. “From a technical point of view, lost $40,000, prices point to go after $30,000. That area is key in the future development of prices. Losing the 29,000 will raise all the alarms, trigger the closing of leveraged operations en masse and lead us to look for the 24,000″, explains Xavier Molina, spokesperson in Spain for the multi-asset investment platform eToro.
The falls also coincide with a time when Russia, the third largest cryptocurrency mining country globally, has proposed to ban the use and creation of cryptocurrencies.
The collapse is even greater in the case of ethereum, which only this Monday left more than 10% and fights to stay above 2,200 dollars.
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