Ukrainian forces made big strides in September in their fight against Russia, allaying some investor fears of a protracted war-induced energy crisis in Europe.
European markets closed higher on Friday (9), as did markets in the Asia-Pacific region. The Dow jumped more than 200 points in the US and the major indexes appeared to be on course to end a three-week slump.
Stock prices tend to rise on news of Ukrainian gains or improvements on the ground, explained Joseph Brusuelas, chief economist at RSM US.
Ukrainian President Volodymyr Zelensky said on Friday that the country’s military has retaken more than 1,000 square kilometers of territory since the beginning of this month as it continues to press in the Kharkiv and Kherson regions.
For the past three days, Ukrainian forces have hoisted their country’s flag at the Kharkiv settlement of Shevchenkove, a major Russian logistical hub within Ukraine, a photo geolocated by the CNN .
If you plot those three days in the direction of the market, said Quincy Krosby, chief global strategist at LPL Financial, it’s clear that this is a contributing factor to equity gains. “This is good news, even on the sidelines,” he added.
Russia’s invasion of Ukraine has slowed global growth and increased inflation through major disruptions to energy supplies – Russia accounts for more than 10% of global oil and natural gas production. Grain supply was also disrupted, leading to a rise in commodity prices.
An energy price shock and a central bank pivot to fight inflation in Europe further dampened investor sentiment. Recessions now look certain in Europe as gas prices continue to accelerate in the winter.
The war in Ukraine has been cited as a factor in about 250 S&P Global credit rating downgrades or outlook cuts since it began in late February. Rising energy costs and interest rates globally mean the impact is likely to spread.
“This power outage is predicted to significantly bring down the European Union economy this winter. Europe in recession will affect US trade,” said Anthony Denier, CEO of Webull. “But if Ukraine continues to have victories, the gas issue can be resolved and everyone will be happy. So people are buying stocks today.”
The ongoing struggle in Ukraine is just one factor impacting markets in a week filled with central bank news, changes in economic policy and new economic data.
Investors cheered on Thursday as the UK confirmed a plan to subsidize energy bills for homes and businesses. There is also a growing expectation that there will be fiscal support across the European Union to tackle the energy crisis, which has boosted global stock prices.
Still, the war could drag on for some time, and Ukraine’s flurry of victories doesn’t mean the problems the war poses will end anytime soon. Investors were clear. The markets want to see an end to this war.
President Zelenskiy seems to understand this sentiment. He remotely rang the opening bell at the New York Stock Exchange on Tuesday as traders cheered and supported him.
Source: CNN Brasil