Written by Millan Chauhan.

Following Russia’s invasion of Ukraine, volatility in markets reached two-year highs which has since seen Russia hit with several sanctions, aimed to restrict its global exports and punish its wealthiest individuals.  Western Allies also agreed to block Russia’s access to the Swift international banking payment system.  S&P Global has also downgraded Russia’s credit rating to junk status with the sanctions set to reduce the capabilities of their financial markets.  Continental Europe is very dependent on Russian Gas, with Germany buying 49% of its gas supply from Russia.

The MOEX (Moscow Exchange) Index closed at -33% on Thursday with the index down -46% year-to-date.  Shares in oil and gas stocks sold off sharply with Gazprom closing at -37%. The Russian Rouble also plummeted in value, falling 30% against the US Dollar.  The price of Brent Crude Oil briefly surpassed $100 with the sanctions imposed set to distort global supply chains further.  This is only expected to increase inflationary pressures and exacerbate the same problem policymakers are trying to address when the Federal Reserve are set to meet next on March 15th.

Global markets sold off sharply last Thursday with Global Emerging Markets & European Markets impacted most, MSCI Emerging Markets declined -3.7% and MSCI Europe ex-UK fell -1.5% in Sterling terms.  The S&P 500 closed +2.1% in Sterling terms following significant intra-day trading on Thursday that saw the largest daily swing since March 2020. Volatility remains very high as markets price in new waves of information.

Russia is a very small component of our Global Emerging Markets Equity asset class exposure, but the event itself clearly resonates through global markets.  We hope a resolution can be achieved quickly.

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