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Increased stagflation risk following Russia’s invasion of Ukraine: Market Commentary March 2022

24 March 2022

MARKET CONTEXT: Increased stagflation risk following Russia’s invasion of Ukraine

Global Macro:  

Financial Markets:  

Equity: Month to date, the S&P 500 and Nikkei 225 have rebounded 2.4% and 4.4%, respectively, while the HSCEI fell 4.8% and the Euro Stoxx 50 further lost 1.3%, largely affected by the war in Ukraine. Fixed Income: The 10-year US yield jumped 54bps to 2.37% amid market anticipations of rising rates, which has contributed to the continued sell-off in Emerging Market government bonds (-3.4% in USD; -2.2% in local currencies) and High-yield corporate bonds (-1.9% in USD; -2.2% in EUR). Currencies: With respect to USD: EUR -2.0%, AUD +2.8%; CNY -1.0%; safe-haven JPY -4.9%, CHF -1.8%. Commodities: Gold prices have edged up 0.9% so far in March, while oil prices have continued to rise (+17.3%) amid growing supply fears triggered by the Russia-Ukraine war.