European markets have just recorded their worst week since October 2020, with the intensification of the fighting in Ukraine and the lack of diplomatic progress. The shelling of the Ukrainian nuclear power plant in Zaporozhia, the largest in Europe, crashed hopes of stabilization on Friday, clearly reviving risk aversion. Volatility is expected to continue to rise as new geopolitical announcements are made.
Weekly variations*
DJ INDUSTRIAL
33614.80  -1.30%
Chart DJ INDUSTRIAL
NASDAQ 100
13837.83  -2.48%
Chart NASDAQ 100
FTSE 100
6987.14  -6.71%
Chart FTSE 100
GOLD
1967.83$  +3.03%
Chart GOLD
WTI
114.96$  +18.84%
Chart WTI
EURO / US DOLLAR
1.09$  -2.19%
Chart EURO / US DOLLAR
This week's gainers and losers
  • Occidental Petroleum (+34%): the company's very strong 2021 results allowed it to raise its quarterly dividend from USD 0.01 to USD 0.13. The surge in oil prices did the rest.
  • Darktrace (+36%): The British cybersecurity firm had a good week after it raised its full-year outlook for the second time in three months.
  • Target (+17%): fiscal Q4 results beat Wall Street expectations, despite supply chain tensions.
  • Lockheed Martin (+10%): the best-selling F-16 or C-130, the new generation F35 jets, missiles... The American is also a reference player in the military field. It has naturally benefited from the great Western awakening.
  • Fortress Energy (36%): The U.S. energy infrastructure company, posted better-than-expected revenues in the latest quarter and a partnership with Eni on a liquefied natural gas project in Congo. The share price is up 34.3%.
  • Snowflake (+31%): Fourth quarter results exceeded expectations, but current quarter forecasts are disappointing compared to market projections.
  • Rosneft (-87.1%):  Western sanctions due to Russia’s invasion of Ukraine, and the withdrawal of its partner BP, are weighing on the stock price of the London-listed Russian oil company.
  • AerCap (-8%), The world's largest aircraft leasing company, announced that it will cease its activities with Russian airlines, representing about 5% of its fleet. It is expected to recover all its aircraft by the end of the month. 
Chart Commodities
Commodities
Commodity prices continue to soar, an environment of high prices that is commensurate with the geopolitical risks caused by the Russian threat. In this respect, it is interesting to take a look at the configuration of the futures prices of the main commodities (oil, copper, wheat etc.), which almost all have in common a so-called backwardation structure, i.e. cash prices (short maturity) higher than futures prices (longer maturity). End users are therefore willing to pay a high price to be supplied immediately, which perfectly illustrates the availability problems in certain sectors due to the boycott of Russian supply.

Let's stay on the topic of boycott, with oil. Buyers are particularly reluctant to buy Russian oil. This mistrust, which is taking on the appearance of a self-sanction, is causing the price of Russian references to fall in relation to Brent (by almost USD 20), but even with this discount, buyers are becoming scarce. This phenomenon increases the upward pressure on the prices of the two main world benchmarks, Brent and WTI, which are now trading around USD 112 and USD 110. Clearly, these prices are making OPEC+ members (outside of Russia) happy, as they have made the decision to stick to their roadmap of increasing production by 400,000 barrels per day in April, while avoiding the hot topic of the war in Ukraine. Finally, according to some market sources, an agreement is imminent on the Iranian nuclear issue.

Still on the energy front, a wind of panic is blowing on gas prices in Europe but also on the price of thermal coal in Asia (Russia is also a major coal exporter). Prices have reached record highs, with the Dutch TTF at EUR 183/MWh and the Asian coal benchmark (Newcastle high-quality thermal coal) at over EUR 400 per tonne.

As concerns grow, the ounce of gold is gaining momentum to slowly but surely move towards the USD 2000 mark. With rising inflation, geopolitical frictions and risk aversion, the planets are aligning for the barbaric relic, which climbed to USD 1950, despite the rising greenback. However, the real star of the precious metals world is none other than palladium, whose price is returning to near its historic high (close to USD 3000). Remember that Russia accounts for one-third of the world's palladium production.
Industrial metal prices continue to rise. Geopolitical frictions and Western sanctions are leading to a disruption of supplies. Shipping companies, such as the Danish giant Moller-Maersk, are temporarily suspending their services to Russian ports, while some exports are suspended altogether, such as steel from Severstal. As a result, prices continue to soar. Copper is reaching USD 10,470 per ton, aluminum is trading at USD 3,730 and nickel is trading at USD 28,800 on the LME.

Let's finish this commodity round-up with agricultural products, which have seen a sharp rise in prices in Chicago. The situation is deteriorating in the Black Sea, where two cargo ships were sunk off Odessa, the largest Ukrainian port. Many shipping companies have suspended shipments to Black Sea ports, disrupting wheat and corn supplies. This disruption is pushing major importers to quickly secure supplies from other countries, an unprecedented demand shock that is further fueling price pressure. The price of wheat has risen by 40% in five sessions in Chicago, to 1200 cents per bushel. Remember that Ukraine and Russia together account for nearly 30% of world wheat exports and about 15% of corn exports.
Chart Commodities
Macroeconomics
No one knows yet how long the war in Ukraine will last, but one thing is fairly certain: it is a source of considerable macroeconomic upheaval. We have already mentioned commodities in the broad sense. We can add to this the dollar, which has pushed the euro down to USD 1.0936, in a logical move of risk aversion. The traditional safe-haven effect of the greenback was accentuated by the physical distance of the United States from the Ukrainian theater of operations.

In the sovereign debt market, the same mechanism was used, with an influx of demand for US Treasury bonds, which caused their 10-year yield to fall to 1.78%. But that is not the only reason: the path of US monetary policy is less clear than expected. Investors found Jerome Powell, the Fed boss, more concerned than expected about the consequences of the war in Ukraine. They think the central bank may give less tightening than expected this year. In Europe, the Bund is back in negative territory at -0.06%.

Against this gloomy backdrop, the digital assets market jumped this week after Ukrainian Deputy Prime Minister Mykhailo Fedorov announced over the weekend that his government was accepting cryptocurrency donations to support the country in the face of Russian offensives. The Ukrainian government has reportedly received more than $50 million in crypto asset donations. In this context, the price of bitcoin has recovered almost 10% since Monday and is back to hovering around $42,000. 

Thursday, March 10 is of particular importance for investors next week. The European Central Bank will speak on its monetary policy, before the US releases February inflation figures. Two events with a strong impact on financial markets.
Historical Chart
Investors are holding their breath
Volatility persists in a very tense geopolitical context. Uncertainty grows as a terrible scenario in Eastern Europe unfolds. The sanctions imposed by the West have had a significant impact not only on investors in Russian companies, but also on companies and countries with interests in the countries affected by the war. Of course, the tensions between Ukraine and Russia, being two of the largest producers of energy and raw materials in the world, have had an undeniable impact on both energy production and distribution. Pessimism is gaining ground, investors are febrile and markets are naturally correcting. Caution is needed.
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*The weekly movements of indexes and stocks displayed on the dashboard are related to the period ranging from the open on Monday to the sending time of this newsletter on Friday.
The weekly movements of commodities, precious metals and currencies displayed on the dashboard are related to a 7-day rolling period from Friday to Friday, until the sending time of this newsletter. These assets continue to quote on weekends.