Ukraine’s impact on the stock market

The people of Ukraine have been going through a torrid time recently, with the escalating crisis continuing, but now the global world could be hit also with global markets being plunged into turmoil because of the crisis. There has been a spike in oil and natural gas prices that could reach into consumers’ wallet, just when the European economy was starting to pick up.

Despite these worrying revelations, and the fear that conflict could ensue in the East, analysts believe that there is little risk of global financial contagion or of major blow back to Western economies.

“If this turns into an outright war, it will be a different story,” said Holger Schmieding, the chief economist at the private bank Berenberg in London. He also went on to state: “More likely it will remain a Cold War-style standoff, and if that’s the case the economic damage for the West and the global economy will be limited.”

All this reassurance is not enough for some though, with many investors still feeling unsettled. This is on top of having been already shaken up about emerging-market economies. The main impact was obviously on Russian and Ukrainian markets, with the Moscow Micex index dropping 10.8 percent. The Ruble fell to a record low against the dollar, and there was concerns spreading to currencies in localised countries such as Poland, Turkey, and Hungary.

The concerning figures prompted the Russian central bank to announce a “temporary” 1.5 percentage point rise in its benchmark interest rate target, up to 7 percent. The central bank released a statement in conjunction with the change: “The decision is aimed at preventing the risks for inflation and financial stability arising from the recent increase in financial market volatility.”

Developed markets have also shown worrying signs since the outbreak of tensions also, with companies in exposure to Ukraine and Russia taking the hardest hit. The Euro Stoxx 50 index of European blue chips closed down 3 percent, and the Dow Jones industrial average lost 153.68 points, the equivalent to 0.9 percent. The NASDAQ composite index dropped 30.82 points, or 0.7 percent, to 4,277.30. These figures certainly prove that as long as tensions are still bubbling in the East, then companies in connection with that region are likely to suffer.

Investors have since moved into traditionally safer assets like US bonds and the Japanese currency. Elsewhere, European banking shares were altered by the situation, led by a 9.6 percent decline in Raiffeisen Bank International. This is huge in the world of banking as the Austrian lender is one of the Western leaders most exposed to Ukraine. Generally though, the fallout to the banking sector will be limited somewhat, due to the financial crisis in 2009, where many Western banks pulled back from Ukraine and Russian lenders.