| Ronen Menachem, Chief Economist of Mizrahi Tefahot Bank
The Israeli stock market will today mark the fourth day of Russia’s invasion of Ukraine. First and foremost, the domestic stock market will be affected by the sharp recovery of US and overseas stock markets in general over the weekend.
The recovery came after the US president made it clear that the US and its allies would not take part in military activity – a statement that removed fears from the capital markets that such a move would be exacerbated, widened and prolonged the war and its aftermath. However, the strength of the recovery was surprising, and it also seemed to have an opportunity aspect of taking advantage of some of the sharp and sweeping declines in the days leading up to it, particularly on the first day of battles.
Markets seem to share with Western decision-makers the view that integrated sanctions – on Russia’s economy, banks and its airlines and senior officials, including President Putin himself – should gradually escalate, to the point of removing Russia from the SWIFT (interbank financial communication) system. The work.
It is also possible that Russia itself, which so far reports its slower-than-expected progress, will choose to curb its activities, although for now these are only speculations, and in any case – as of today, Russia’s official responses to all measures announced against it have been repealed and countermeasured . Russia holds a major advantage in being the EU’s main natural gas supplier, which is at the forefront of economic activity against it.
Either way, since this is a sharp military confrontation, various complications and ramifications need to be taken into account, including text intensity from all sides involved – which will continue to cause sharp volatility of the various markets, at least in the short term.
As for the domestic bond market, the unlinked shekel channel may reflect the consequences of the sharp rise in fuel prices, as a result of the jump in world oil prices – which will have an upward effect on the indices of the coming months.
The shekel will continue to reflect, in the short term, the directions of stock markets abroad, while it tends to depreciate when there are declines and vice versa.
In the media’s campaign in Ukraine, economic data continue to come out – and over the weekend the US reported that the Federal Reserve’s price index, which examines the inflation rate, rose 0.6% in January and 6.1% in the last 12 months – further evidence of the inflation environment The highest there.
March is upon us, and Fed Chairman Jerome Powell and his colleagues will have to make a complex decision on raising whether the fighting will continue until then. This issue will also add to the volatility that will accompany the markets in the near future.
In general, in the face of the apparent jump in food prices, given that Russia and Ukraine are large and major suppliers of corn, wheat and other agricultural commodities around the world, the campaign will, as time goes on, further increase global inflation. .
Since in the situation created all sides have something to lose, efforts to end the campaign as quickly as possible will continue to be intense – which increases the chance that a compromise will be found that will stop the fighting. This is, in my opinion, the basic scenario, but as mentioned, there are many risk factors – and as of today it can be estimated that market volatility will continue to reflect this.
The author is the chief economist of Mizrahi Tefahot Bank. This review is not a substitute for investment marketing that takes into account the data and special needs of each person.