Information
Ukraine Conflict - Update as at March 24, 2022
Summary of the views of some of our investment entities.
Worries about the economic recovery, the actions of the central banks and now the conflict between Russia and Ukraine are crystallizing in a general fall in the markets, experienced by practically all the stock markets in the developed countries since the beginning of the year, and more particularly in the last few days.
Since the Fed's aggressive move, and that of other major central banks, visibility on the medium term outlook has become blurred, investors have been jittery and equity and bond markets have become highly volatile.
Management has taken more prudent positions:
- underweight in the equity category,
- maintaining the overall underweight for yields, with a preference for inflation linked bonds in the euro area.
In summary, since 15 February, the portfolios of CM AM funds have been adjusted, particularly in anticipation of the deterioration of the geopolitical context.
On the eve of the European Council, Vladimir Putin demanded payment of natural gas in ruble for the Western countries, a measure that could also concern other exports according to the Kremlin soon. This announcement pushed the price of a barrel above $120, the European gas price around €110/MWH and revived the concerns of the financial markets, which posted a drop this morning.
This requirement penalizes purchasing countries and supports the Russian currency, which appreciated significantly yesterday, even though this rise remains minor compared to its collapse since the beginning of the conflict.
The day will be busy with the arrival of Joe Biden to Europe for the NATO, G7 and European Union summits. Discussions will focus on a common response to mounting Russian attacks in Ukraine, although Europe remains hostile to Russian energy sanctions for which it is heavily dependent. Germany wants to take the time to find solutions to reduce its dependence and therefore the impact on the economy.
Europe's release of provisional PMIs gave an initial indication of the economic impact of the war in Ukraine. However, the drop in indicators is still modest at this stage, while some of the economic consequences (supply and inflation of costs and loss of purchasing power for households) will gradually materialize in the coming months.
In this context market volatility remains high.