IMPACT: The deepening Ukraine crisis adds uncertainty to global markets, exacerbating existing inflation and Fed hiking fears. But history shows geopolitics has limited medium term global markets impact, with pre-event effects the worst. Commodity disruption fear should not be overdone. Local impacts will dominate. Russia and eastern European assets have borne the brunt of rising concerns. These cheap assets have become even cheaper.
DOWN: Russian equities (RSX) are down c15% YTD, led by sanctions-exposed banks like Sberbank (SBERL.L), with commodity stocks, like Gazprom (OGZD.L) and Evraz (EVR.L) less impacted. The rouble (RUB) has been cushioned by high interest rates, and other eastern European currencies, like Polish Zloty (PLN), firm. Similarly, emerging market local currency debt markets (IEML.L), where the region is relevant. Many global stocks with large Russia exposure, like Philip Morris (PM) and Metro (B4B.DE), been resilient, but are not immune to a local macro slowdown. Russia is c3% of global GDP.
UP: The biggest impact has been on those commodities where Russia is a big producer. Disruption fear has roiled already tight markets. Palladium (PALL) led, with Russia dominant producer of this auto metal. Substitute Platinum (PPLT) has followed. A risk premium has been baked into global oil (USO) and EU natural gas prices, with Russia the largest supplier. Russia and Ukraine are also one of the largest wheat (WEAT) exporters. Sanctions risks may be overdone, with products fungible and inflation fears dominant.
All data, figures & charts are valid as of 21/02/2022