Stock markets tumble amid Russia/Ukraine tensions

STOCK MARKET
Stock markets tumble amid Russia/Ukraine tensions

What’s going on?
Yesterday major stock markets around the world slid as fears over a conflict between Russia and Ukraine grew.  

European shares suffered their worst day since June 2020 with the UK FTSE 100 down 2.6%, the French CAC down 4.0% and the German DAX 3.8% lower.

In the US, both major indices the Nasdaq and S&P 500 – down 7.6% and 5.7% respectively last week, the worst since March 2020 – lurched lower in a busy day of trading.

Why is this important?

Anyone who checked their stock portfolio yesterday would have been greeted with a sea of red.

Markets were rattled by NATO’s decision to put military forces on stand-by for a potential attack by Russia on Ukraine. The US ordered family members at its embassy in Kyiv to leave “due to the continued threat of Russian military action”. 

As major gas producers, any instability in Ukraine and Russia leads to concerns over energy supplies so wholesale gas prices also rose sharply.  
 
Ukraine aside, markets were already nervous ahead of the Federal Reserve’s first policy meeting of 2022. 

Tomorrow, the US central bank is widely expected to signal a first interest rate rise since 2018 in March. Economists expect there to be four increases this year alone.
 
Murmurings over interest rates hikes are good news for banks who can charge more for loans, but bad news for tech stocks whose future earnings are less attractive with higher interest rates. 
 

ECONOMY
UK economic activity hits 11-month low

New data released yesterday showed that a slowdown in the service sector held back the UK economy at the start of 2022. 

IHS Markit’s services purchasing managers’ index (PMI) fell more than expected to an 11-month low of 53.3.

The PMI is a monthly survey to managers across different areas of business, designed to give a picture of how busy the economy is. A score of over 50 indicates the economy is growing whereas below this suggests the opposite.

The latest number shows that although the economy is expanding, growth has slowed to the lowest since February 2021 with some sectors hit more than others.

Customer-facing parts of the economy such as hospitality, leisure and travel struggled because of Omicron restrictions. Manufacturers also reported a weakening of order book growth. But in better news growth in business and financial services was strong.

So what’s the outlook for the rest of the year? With the government’s Plan B restrictions now easing, the downturn in leisure and hospitality should hopefully be brief.