Events in Ukraine continued to dominate headlines, demanding attention from all, investors included. From a market perspective, Europe’s decision not to follow the US in embargoing Russian oil and gas was critical to developments over the week, as it has removed some of the worst scenarios for European the economic growth outlook.

US: All eyes on the Federal Reserve

US markets fell over the week, with the information technology stocks among the key detractors. The sector is seen as most at risk to the threat of rising interest rates as higher rates. The Nasdaq index – which is heavily skewed towards high growth technology stocks – ended the week more than 20% below the peak it reached in November last year. The Federal Reserve – the US central bank – meets this week and is expected to raise interest rates for the first time since the Covid pandemic struck.

Japan: Economic concerns weigh on markets

Weak economic data added to the negative sentiment triggered by geopolitical events. Economic growth in the fourth quarter of 2021 was revised down from 5.4% to 4.6%, while household spending – which accounts for more than half of Japan’s GDP – fell in January, highlighting that the coronavirus has not gone away and raising fears that the economy may contract over the current quarter.

China: increasingly central to the geopolitical outlook

So far, China has played a relatively neutral role in the Ukrainian conflict. However, this neutral stance is becoming increasingly precarious. US intelligence agencies have reported that Russia has asked China for military assistance. Meanwhile, the Biden administration continues to put regulatory pressure on the Chinese technology sector, which this week led the Chinese stock market lower. The US and China will meet this week for a high-level diplomatic discussion, the outcome of which could have a significant bearing on developments in and around Ukraine.

Europe: Inflation and Omicron concerns impacts markets

Stock markets in Europe ended a volatile week with healthy gains following Europe’s decision not to ban Russian energy imports. Russia supplies roughly 40% of the continent’s energy needs, with countries in Eastern Europe, Germany and Italy even more dependent on Russian oil and gas. The decision therefore annulled some of the worst scenarios for the European economic growth outlook, and also helped drive the oil price some 15% below its recent peak.

UK: All eyes on Omicron

The UK stock market was bolstered by its high allocations to commodity producers – although the price of oil and some other basic materials fell sharply, they remain high, boosting profit margins at the like of Shell and Glencore. Financials – which typically benefit from higher interest rates – were also conspicuous among the winners. The Bank of England meets this week and is expected to raise interest rates for the third time since December.

Over the next few weeks, we will continue to update you on the impact this ongoing crisis is having on markets. Over the next few days and weeks, we will seek to continually update you on the impact this ongoing crisis is having on markets and how our investment managers are positioned in their portfolio. To get access to these ongoing insights, please speak to your financial adviser.

The Omnis Managed funds, Openwork Graphene Model Portfolios and Omnis Managed Portfolio Service provide you with a diversified asset allocation in line with your Attitude to Risk, investing in Developed Market Equities, such as UK, US, Europe and Asia Pacific as well as Emerging Market equities.  Cautious and Balanced investors will also have significant holdings in UK and Global Bonds, as well as Alternative Strategies.  We believe this multi-asset approach aims to minimise global equity market falls in volatile periods.  Past performance is not a guide to future performance.  The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations.  You may not get back the amount you originally invested.

At Money & Mortgages, our team are happy to arrange video meetings and phone appointments.  For more information please contact us on 0161 505 0601 or via email info@moneymortgages.co.uk

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