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Markets Expert Reacts To Russia’s Invasion Of Ukraine

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As Russia invades Ukraine today, Giles Coghlan (Chief Analyst, HYCM) provides his comments below, reflecting on the wider economic implications for traders and investors.

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Giles Coghlan, Chief Analyst, HYCM said:

“Markets have woken to the news that Russian President Putin has ordered a ‘special military operation’ to ‘demilitarise’ Ukraine, just a day after the West imposed new sanctions on Russia. As military action escalates, we can now expect a steady trickle of further sanctions throughout the day, which will have ramifications across the markets.

“In terms of financial impact, the Russian stock market is already down 28%, with the Bank of Russia intervening in FX markets to stabilise the situation. Up until now, sanctions have been targeted, with the US placing curbs on two state-owned financial institutions and five Kremlin-connected elite. This will have a measured impact on Russia’s financial system, its defence sector, and its ability to raise funds – but these are not institutions that ordinary Russians bank with.

“Going forward, any further sanctions imposed – especially those placed on Russia’s largest state-run banks – could have a sweeping effect on everyday Russian people, as well as the current production of oil and gas. Just yesterday, the Bank of England’s Governor, Andrew Bailey, stated that there is an upside risk to energy prices from the invasion. With commodity prices also expected to surge, global stocks are down, as well as bonds bid on safe haven flows. Right now, the UK FTSE 100 is holding up much better than most of its global counterparts. 

“Should investors be worried? As sad as the human cost is during this event, financial costs tend to be limited. A glance back at some of the gravest world events in recent history reminds us of this – the bombing of Syria in 2017, the US withdrawal from Afghanistan and the North Korean Missile crisis, for example, show us the market reaction to these events can be surprisingly mild. Most dips end up being bought, so medium-term buyers can often find good value in these bleak times.”