Russian outbidding freezes the stock market


Since February 23, the day before the Russians entered Ukraine, the Cac 40 has recorded five out of seven sessions of decline and lost 10.6%. Since the historic peak of January 5, the fall is 17.9%.

Russian outbidding freezes the stock market

How far will Vladimir Putin go? At dawn on Friday, the bombardments near the largest nuclear power plant in Europe, located in Ukraine, raised fears of the worst. The Paris Stock Exchange has just experienced its darkest week since March 2020 (-19.8% then over the five sessions ending on March 13), a month now synonymous with terror, first for a global pandemic and today for the war in Europe.

This escalation of fear is pushing investors to shed risky assets, such as equities, and to turn to safe havens, such as the dollar, the yen or the Swiss franc. They also buy government bonds, which lowers yields. Even less advantageous, Treasury bills represent a safer investment, just like gold, whose value has continued to appreciate to reach $1,961 on Friday.

Sector rotation is going well: after growth stocks, then value stocks, it is now time for defensive stocks, in every sense of the term, since the defense sector has been on the rise for a week, as well as certain oil companies (not present in Russia) (see p. 6 and 7). As Russian barrels find fewer and fewer takers, supply problems intensify, and Brent priced at $119.72 on March 3.

We were hoping for a blitzkrieg. The remarkable resistance of the Ukrainians implies a long conflict. As for the sanctions, they will not only have repercussions on Russia. Companies will put the brakes on their investment and acquisition projects. Global growth will slow, which puts central bankers in a very delicate situation, given inflation. An acceleration of price increases in a sluggish economy has a name: stagflation. In the coming weeks, volatility should remain elevated.


SYLVIE AUBERT




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