NEWS
March 2022 on the markets
19.4.2022 / News
The war in Ukraine dominated the news and markets in March. Commodity prices soared given Russia is a key producer of several important commodities including oil, gas, and wheat. Russia and Ukraine account for around 30% of global wheat exports. Natural gas soared 28% to 5,642 MMBTU, in part on concern about security of supply from Russia which Europe heavily relies on. As the invasion began, Germany also suspended the approval of the Nord Stream 2 gas pipeline from Russia. Oil gained 4,76% to 100,28 dollars per barrel but went as high as 130,50 dollars per barrel in early March. Since then the International Energy Agency (IEA) and others agreed to release oil from strategic reserves to help ease the prices.
Nonetheless there are fears that the high energy prices will weigh on both business and consumer demand, hitting economic activity. The higher food and energy prices contributed further to inflation which increased to 7,9% in the US and 7,5% in the eurozone. Since these numbers are for February the impact of the Ukraine invasion, which started on February 24, is mostly not yet accounted for.
In response central banks have set a more hawkish tone with the Federal Reserve raising the interest rate by 0,25% with calls for more aggressive tightening. Its aggressive stance helped the dollar gain 1,37% against the Euro to 1,1065$/EUR. The ECB outlined plans to end bond purchases by the end of September and indicated that a first interest rate rise could potentially come this year. Meanwhile 10-year US treasury yields soared from 1,822% to 2,345% and shows no signs of slowing down.
Despite the geopolitical and monetary issues, US stock indices closed the month in green with the Dow Jones gaining 2,36%, the S&P500 3,58% and Nasdaq Composite 3,41%. Being closer to the conflict and more liable on Russian and Ukrainian trade, Europe closed slightly in the negative with the DAX losing 0,32%, Eurostoxx losing 0,55% and France's CAC index squeezing out a 0,02% gain. The Slovene SBITop on the other hand was a big winner, adding 10,95%. Also the UK FTSE index added 0,77% while the Pound Sterling lost the exact same 0,77% against the Euro to 0,8422GBP/EUR.
Meanwhile in Japan the Nikkei index gained 4,88% to end March just slightly below its end 2021 level. However the yen weakened sharply against all major currencies, reaching a six-year low against the US dollar. Chinese equities were negatively affected by renewed Covid-19 outbreaks, leading to new lockdowns in some major cities. The Hong Kong Hang Seng lost 3,15%.
Rudy Marchant
Fund manager Primorski skladi