February 22 was an extraordinary day for the global capital market, with ups and downs.
Market panic rose to a high point before the U.S.-led Western countries announced specific sanctions.
Russia's RTS index plunged 10 percent at one point; the Russian ruble fell below 80.9 against the dollar, a two-year low; and the three major U.S. stock indexes collectively fell about 2 percent intraday.
However, after the formal announcement of the sanctions plan in Europe and the United States, the market trend has shown a major reversal.
Russia's RTS index recovered all of its intraday losses, closing up nearly 1.6 percent; the ruble also rebounded against the dollar, rising 0.8 percent after a day of decline.
Some commentators said that in addition to the Nord Stream 2 pipeline, Biden did not announce major economic sanctions, nor did it restrict the international banking system SWIFT-related sanctions and threats.
After the continuous official announcement of sanctions measures in Europe and the United States, the market did not fall more, and the Russian stock exchange reversed instead.
01 Europe and the United States sanctioned Russia
After Russia recognized the two regions of eastern Ukraine as independent republics, the situation in Russia and Ukraine further intensified.
On the 22nd local time, Putin was approved to use Russian armed forces abroad. Russia also issued a statement withdrawing personnel from its diplomatic mission in Ukraine.
After receiving a parliamentary mandate, Putin said that he would fulfill his obligations if necessary. After that, Biden issued a speech on the situation in Ukraine, in which he announced tougher sanctions against Russia, the sale of sovereign bonds outside Russia and the imposition of sanctions on Russia's "elites and families", saying that if Russia continues to invade, further sanctions will be imposed in the future.
The Biden administration will also ban U.S. financial institutions from handling transactions with Russian banking giant VEB and its military banks. This sanction against VEB amounts to cutting off the bank's dollar trading activities.
Biden said sanctions on Russian sovereign debt would cut off the Russian government's financing to the West.
The 27 eu-states unanimously adopted the first round of eu sanctions against 351 deputies of the Russian State Duma. In addition, the sanctions target 27 entities and individuals, including political policy makers and the banks that finance them.
Britain's first sanctions against Russia target five banks and three billionaires.
The economic sanctions targeted five Russian banks, Rossiya, IS Bank, General Bank, Promsvyazbank and the Black Sea Bank, as well as three "very high net worth" individuals, Gennady Timchenko, Boris Rotenberg and Igor Rotenberg. The trio's assets in the UK will be frozen and barred from entering the UK. All entities and individuals in the UK are not allowed to transact with these three persons.
According to the surging news, Germany has not yet announced sanctions against Russia, but has suspended the approval process of Nord Stream-2.
02 Russian stock exchange reversal, what happened?
The reason why there will be a sharp rebound after the "boots landed" and the sanctions measures "lower than expected" has become the key reason, which is very much in line with the consistent style of the capital market.
Although many European and American countries have announced a number of sanctions, ranging from the ban on Russian bonds, the suspension of the certification approval of the "Nord Stream II" natural gas pipeline project (which is considered to be the most significant sanction at present), to the sanctions of high-net-worth individuals, the cessation of visas, etc., but from the current market feedback, these risks have been "digested" by the market.
Bloomberg analysis said that it is precisely because traders believe that Western sanctions are limited, so the Russian stock market and the ruble can rebound from the sharp decline.
Bloomberg also joked that the United States and its allies have neither taken a package of sanctions to comprehensively crack down on Russia's top banks, nor cut off the connection between the Russian financial system and the global economy, and of course have not personally singled out Russian President Putin, but have chosen a moderate "first round" of sanctions. Therefore, the market's reaction to this is to "shrug your shoulders".
Simon Harvey, head of analysis at Forex trading agency Monex Europe, said:
The Statements by Western countries reflect that the sanctions are not as harsh and widespread as initially feared.
Anastasia Levashova, fund manager of asset management firm Black Friars Asset Management, agrees:
For now, most of the risks seem to have been digested, 'sanctions' will be limited to a certain range and will avoid the energy sector, and we do not expect military tensions and border disputes to turn into full-blown military conflicts.
Bloomberg pointed out that some European countries have been vigilant about the possible economic consequences of sanctions against Russia, considering that they rely on Russian gas.
A senior U.S. government official also said on Tuesday that the Biden administration would take steps to ensure that its sanctions against Russia against Ukraine would not lead to higher energy prices, and the United States was trying to weaken the Russian economy while avoiding collateral damage to the United States, the Wall Street Journal reported.
The official said:
"The sanctions imposed today, and the sanctions that may come soon, may not be directed at and will not target (Russian) oil and gas. We want the market to note that there is no need to raise prices at this time. ”
The senior U.S. official added that nothing that happens in Ukraine now and in the coming days will affect the flow of oil to global markets.
He stressed that U.S. officials have been working with oil producers and oil-consuming countries of the Organization of the Petroleum Exporting Countries (OPEC) to respond when necessary to stabilize energy markets:
"We will act quickly to deal with any price spikes caused by geopolitical impacts or daily political risks." But it's not there yet. ”
03 Tougher sanctions are yet to come?
However, U.S. Deputy National Security Adviser Jon Finer said on MSNBC that in order to prevent Moscow from issuing orders to troops going deeper into Ukraine, a more severe departure may be delayed, while stressing:
If Russia takes further action, we will impose more serious consequences [on Russia] by imposing sanctions.
According to CNN, Biden also reiterated this view on Tuesday, saying that if Russia further "invades" Ukrainian territory, the United States is prepared to increase sanctions.
Peter Harrell, senior director of international economics and competitiveness at the White House National Security Council, noted in Tuesday's meeting:
We will not adopt the traditional rhythm of escalating sanctions, that is, first sanction government officials, then turn to state-owned entities, and then strategic departments... Instead, we want to adopt a 'high open high' sanctions path.
In addition, following the cancellation of the "General Visit", US Secretary of State Blinken said that the talks scheduled for this week with Russian Foreign Minister Lavrov were also canceled.
As of press time, in addition to the United States, Britain, France, the European Union, etc., Canada, Japan, and Australia have also joined the ranks of sanctions against Russia.
Japanese Prime Minister Kishida Fumio announced the content of Japan's sanctions against Russia on the 23rd. The main contents include: Japan has stopped issuing visas and frozen assets against the relevant personnel of the two "republics" that Russia recognizes the "independence" of Eastern Ukraine; prohibited imports and exports between the two "republics" and Japan; and prohibited the Russian government from issuing and circulating new sovereign bonds in Japan.
The Canadian government announced the first round of sanctions against Russia on the 22nd local time. Specific measures include: prohibiting Canadians from buying Russian sovereign debt; imposing sanctions on two state-backed Russian banks; prohibiting Canadians from conducting any financial transactions with Donetsk and Luhansk; and sanctioning members of the Russian Duma who voted to recognize the independence of the two regions.
Canadian Prime Minister Justin Trudeau also ordered an additional 460 Canadian servicemen, including the army, navy and air force, to join NATO's mission in Eastern Europe. For these so-called sanctions, former NATO commander David Fraser believes that this is unlikely to have an impact on the current situation in Russia and Ukraine.
Australian Prime Minister Scott Morrison said at a news conference in Sydney on Wednesday that sanctions would be imposed on Russia. Specifically, it includes sanctions against eight officials of the Russian Security Council and sanctions against a number of Russian banks. Morrison added that further measures are expected in the future.
04Taking history as a mirror, what impact did the Russian-Ukrainian crisis have on the capital market?
Compared with the experience of previous conflicts, the impact of the Russian-Ukrainian crisis on the international capital market should be mainly emotional impact, and the duration is relatively short, not changing the original trend of the market. Judging from the 2008 War in Georgia and the Crimean Conflict in 2014, except for russia's own capital markets, the US and Chinese stock markets have gradually pulled back after a brief downward shock.
For commodities, crude oil prices were generally on the decline during the 2008 Russian-Georgian war. Founder Securities had believed that there were several reasons, 1) the us dollar continued to rise, (2) Federal Reserve Chairman Bernanke admitted that financial markets were volatile, and pessimistic expectations led to a large number of investment funds leaving the market.
Oil prices rose from $92/b in January to $107/b in 14 years during the Crimean conflict in 2014. Gas prices have fallen sharply, mainly because Ukraine is not the only transit point for Russian gas to Europe; the winter reduces Europe's demand for natural gas; and the level of natural gas stocks in Europe is high.
But the current situation is very different, mainly the shortage of natural gas and oil is relatively obvious, and on the basis of supply determining short-term prices, the Nord Stream 2 pipeline problem and conflict may trigger market concerns about oil supply, which may become a short-term driving force for tall commodities, especially crude oil, to create new highs.
In addition, the escalation of the conflict has also raised the gold price relatively limited.
Geopolitical tensions can lead to high short-term risk aversion and higher gold prices. During 2008, in order to avoid long-term inflation, the United States adopted a strong dollar policy, and the price of gold fell. Gold prices also did not change their downward trend during the Crimean conflict in 2014.
For now, gold will remain in a relationship with inflation and real yields on US Treasuries. Because if we start from the need for safe haven, if Ukraine finally has to swallow this breath, maintaining the local war situation will weaken the expectation of risk aversion. But if a full-scale war is really escalated, I am afraid that Russia will not take long.
Written by Gao Zhimou, Zhu Xueying, Zhou Xinyu, and edited by Wang Li
【February 2022 Shanghai Master Class Recruitment】Lingpeng Investment Review Series III.: Comparison of A-share Industries and Review of Industry Changes - The Changes in Cycle, Consumption, and Technology in the Past 20 Years
⭐ Star Wall Street sees, good content is not missed ⭐
This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, opinions or conclusions in this article are appropriate for their particular situation. The market is risky, investment needs to be cautious, please judge and make decisions independently.
After the multinational sanctions, the market reaction is just "shrugging"?