Six charts to know about the financial markets

Below are six charts illustrating the recent dramatic market movements:

THE EURO IN THE DARKNESS

The euro fell below $ 1.10 on Friday for the first time in nearly two years. This week it lost more than 3% against the dollar, marking its largest weekly decline since March 2020.

The single currency suffered even greater losses against the Swiss franc. It lost nearly 4% during the week, which is the biggest drop since January 2015, when Switzerland dropped the three-year upper limit of the franc against the euro.

Fears that the Russian invasion of Ukraine will deal another blow to the economy, especially with soaring energy prices, explain why the currency is one of the biggest losers of the week. Chart: The Euro Takes a Scratch, https://fingfx.thomsonmigration.com/gfx/mkt/akvezxnlepr/euroforkarin.PNG

CRACOLI AND METALS

Prices of commodities, from wheat to various metals, have hit record highs for several years as Western sanctions have disrupted air and sea shipments of goods produced and exported from Russia.

Russia and Ukraine are two of the world’s largest wheat exporters, reaching their 14-year high on Friday, after gaining nearly 40% since Russia invaded Ukraine on February 24.

Russia is also a supplier of metals. Aluminum hit a record high on Friday, while copper, which the country supplies 3.5% of the world’s supply, also hit a new all-time high.

Graph: Grains and Metals, https://fingfx.thomsonmigration.com/gfx/mkt/lgpdwaakxvo/Wheat%20and%20commodity%20prices.PNG ENERGY & GAS

Brent prices rose another 21% during the week, closing the highest level since 2013, as buyers and shippers increasingly shy away from the five million barrels per day (bpd) supply of Russian oil.

Neither the possibility of a million bpd of Iranian crude oil in the event of a relaunch of the nuclear deal with the West, nor the agreement of developed countries for a coordinated release of 60 million barrels made a difference.

Gas prices in Europe recorded an astonishing 120% weekly increase, hitting a record € 208 per megawatt hour. Chart: Brent and gas prices in Europe, https://fingfx.thomsonmigration.com/gfx/mkt/lbpgnzzgjvq/Brent%20crude%20and%20European%20gas%20prices.PNG

SANCTIONED EUROPEAN BANKS

European banks experienced another difficult week, under the triple blow of Western sanctions against Russia, the downward revision of rate hike forecasts and the deterioration of the macroeconomic environment.

These movements reverse all the gains made at the beginning of the year, when it seemed that the economic recovery would allow central banks to raise interest rates, to the benefit of the banks.

A European banking stock index fell roughly 16%, the worst week since March 2020, bringing year-to-date losses to 20%. Shares of creditors exposed to Russia, such as Austria’s Raiffeisen and France’s SocGen, fell by about a third over the week. Chart: European banking stocks lost over 16% this week, https://fingfx.thomsonmigration.com/gfx/mkt/gdvzybngwpw/banks%20for%20karin.PNG

LOVE FUNDS

Due to turbulence in European markets, heightened uncertainty over the economic outlook and reduced bets on rate hikes, investors sought to secure safe haven bonds.

In Germany, the euro zone’s benchmark bond issuer, 10-year bond yields fell 30 basis points this week, the largest drop in a week since the 2011 euro debt crisis.

-0.08%, German Bund yields are back in negative territory. In other words, investors are willing to pay the German government to keep its bonds in an uncertain environment. This was not the case a week ago when Bund yields stood at 0.22%. Chart: Bund yields below zero, https://fingfx.thomsonmigration.com/gfx/mkt/zgpomzjqrpd/Bund%20yields%20back%20below%20zero.PNG

DISCONNECTION OF THE RUBLE

The Russian ruble fell by more than 30% on offshore exchanges – the worst week in its history – and by around 20% on the Moscow exchanges. The gaps between bid and ask prices are very large, a sign of evaporation of liquidity.

The divergence between onshore and offshore trade illustrates how disconnected Russia is from global financial markets after harsh sanctions and countermeasures. Chart: Russian Ruble Disconnect, https://fingfx.thomsonmigration.com/gfx/mkt/klvykbbgjvg/Russia%20rouble%20onshore%20and%20offshore.PNG

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