The financial markets are still under pressure after the West’s tightened sanctions against Russia. The losses on the stock exchanges, which were sometimes very severe at the start of the week, were noticeably contained by the close of trading on Monday. Most stock exchanges in Europe closed with discounts of around one percent or even a little less. Relatively moderate losses were also posted recently in the USA.
However, concerns about the economic consequences of Russia’s invasion remain high. Rising prices for commodities such as oil could fuel inflation further. In addition, trade with Russia threatens to come to a standstill in many areas after the exclusion of large Russian financial institutions from the banking communication network Swift. Investors are looking to safe haven assets like the US dollar, bonds and gold. The Russian ruble continued to plummet.
When do the doors open again?
The stock exchange in Moscow remained closed on Monday in view of the current situation. On Monday evening it was announced that there would be no trading on Tuesday either. The central bank plans to announce at 9 a.m. the day before whether the doors to the stock exchange will open again on Wednesday.
The first talks between Ukraine and Russia gave investors only limited hope, because they did not mean a break in the fighting. The nuclear power Russia put its deterrent weapons on increased alert.
The leading German stock index Dax initially lost more than three percent, but then ended trading with a relatively moderate discount of 0.73 percent to 14,461.02 points. The MDax even closed up 0.23 percent at 31,873.35 points.
Winner armor stats
Significant price gains in armaments became a counterpoint to the market-wide price losses after Chancellor Olaf Scholz (SPD) announced in the Bundestag on Sunday that the Bundeswehr would receive 100 billion euros. The Rheinmetall share jumped by around 25 percent.
“It must be taken into account that the market reactions have remained manageable so far and on balance, which is surprising in view of the war in Europe fueled by Russia and the indirect threat of nuclear weapons,” explained analyst Ralf Runde from Landesbank Helaba. There is no sign of panic, although the fluctuations are likely to remain large.
The West is tightening the sanctions screw against Russia and also wants to supply additional weapons to the Ukrainian armed forces. On Monday night, the European Union implemented its severe sanctions against the Russian central bank. According to EU Commission President Ursula von der Leyen, they include a ban on transactions with the financial institution. In addition, all assets of the central bank in the EU will be frozen.
Ruble on the decline
The Russian ruble then plummeted. Most recently, 105 rubles had to be paid for one US dollar, a quarter more than on Friday. It didn’t help much that the Russian central bank raised the key interest rate by 10.5 percentage points to 20.0 percent.
Russia’s central bank also wants to support the domestic financial system with further measures. Securities dealers were now prohibited from selling Russian securities owned by foreigners, as the bank announced on Monday morning. Domestic financial institutions are also to be supported with capital injections and foreign currency transactions.
In addition, Germany, the United States and other Western allies decided to exclude Russian financial institutions from Swift. According to experts, however, this will also weigh on the German economy; trade with Russia could largely come to a standstill. However, it seems to have been important to the federal government that gas and other raw material deliveries can continue to be paid for. That could be done through the banks remaining in the Swift system, it said.
Serious consequences for Germany
For Germany, the economic consequences are more serious than was foreseeable last week, explains Michael Holstein, chief economist at DZ Bank. “We have to assume that the inflation rate will continue to rise in the coming months due to very high energy prices. A decline below the four percent mark on average in 2022 seems difficult to imagine. The economic recovery expected for spring is also likely to be weaker than previously assumed.” The high rate of inflation weighs on the purchasing power of private households and increases company costs.
European gas prices soared on Monday. The price of oil has recently increased by three to four percent. For a barrel (159 liters) of the North Sea Brent, more than 100 dollars had to be paid again.
The exchange rate of the US dollar rose against the euro. Most recently, just under 1.12 dollars had to be paid for one euro. The price of gold rose more than 1 percent to around $1,913. The price remained below its previous week high. For February, the precious metal is still clearly in positive territory. The prices of German government bonds also increased. (dpa)