Ukraine crisis: Investors are reacting hectically, selling shares and fleeing to safe havens such as western government bonds and gold, the crisis currency.
(Photo: dpa)
There are violent swings on the financial markets: the precarious situation on the Russian-Ukrainian border is causing investors to frantically sell shares and flee to western government bonds, which are considered safe, and to gold, the crisis currency. The price of oil keeps going up too. And all of this can get even worse. It is all the more important to keep a cool head right now.
On Monday alone, well-regarded indices such as the German Dax and the leading euro zone index Euro Stoxx 50 fell by more than three percent at their peak. The prices of the important ten-year US government bond and the federal bond rose, yields fell well below two percent again and to around 0.2 percent.
Gold is hovering near its 3-month high. And the price of North Sea oil Brent is about to surpass the $100 per barrel mark for the first time since 2014.
Investors are understandably anxious about this concrete threat to peace at the gates of the EU. The stock market reactions reflect normal behavior in crises. If things get even more dramatic around Russia and Ukraine, according to experienced investors, the leading German index could drop another 1,000 to 2,000 points.
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But as long as world leaders are still talking to each other, there is hope that a major catastrophe can be averted. Therefore, stock experts expect so far that it will remain with a short-term stock market slump.
However, the longer the state of emergency drags on, the more the high and probably further rising energy prices will eat into the economy. This increases the burdens that are already causing headaches for entrepreneurs and consumers: high inflation and possible consequences for the economy, which is just beginning to recover from the corona pandemic.
Not a place for the faint hearted
A prolonged conflict over Ukraine, which gives rise to fears of oil and gas supply disruptions, could drive energy prices and thus inflation much higher. This fuels renewed fears of stagflation – ie a stagnant economy with high price level increases. This scenario occurs when a sharply rising oil price also weakens demand, so that companies are beset by rising costs and weaker sales at the same time. According to experts, the fear of this has not yet been included in stock prices. So if things go really badly, the markets can get even worse.
But panic would be the wrong reaction. Because professional investors in particular get back in as soon as possible – and then drive the prices back in the opposite direction. These turbulent times prove one thing once again: the stock exchange is not a place for the faint-hearted.
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