A Swift Response To Russia

Weekly Market Update | February 28, 2022

Highlights

Globally, stocks sold-off as the tensions between Russia and Ukraine escalated. Emerging markets suffered the most with a 4.8% drop as Russian stocks dragged the index lower. European and Japanese stocks also fell with the indices down 2.3% and 2.9%, respectively. U.S. stocks held up better with the S&P 500 gaining 0.8% and the NASDAQ rising by 1.1% as interest rate pressures eased. The 10-year U.S. Treasury yield was little changed at 1.96%.

The ongoing conflict between Russia and Ukraine has led to a swift response from NATO allies with the severity of sanctions increasing and the pressure on the Russian economy rising. In response, Russia’s central bank has also taken dramatic actions by raising the country’s policy rate from 9.5% to 20% and shutting down the country’s stock and derivatives exchanges. Thus far, sanctions on the country’s energy sector have largely been avoided to limit the collateral damage from surging energy costs.

On Wednesday, Fed Chair Powell will speak to the House Financial Services Committee. Investors will be watching for any clues as to how the conflict may impact monetary policy. In response to the conflict, markets are now pricing in just a 9% chance of a 50-basis point rate hike in March and a 40% chance of six rate hikes by year-end.