The London Stock Exchange suffered its biggest weekly losses since the start of the global pandemic in March 2020, as investors scared off the escalating conflict in Ukraine.
Stocks plunged in the city after news of a fire and Russian capture of Zaporizhzhia in Ukraine nuclear power plant, the drop in one day of more than 250 points in the FTSE 100 index bringing the weekly loss to 6.7%.
European stock markets also recorded steep declines amid fears the impact of the fighting in Ukraine could spread westward across the continent. World Bank President David Malpass told the BBC the war was a “catastrophe” for the global economy.
Currency and commodity markets also ended the week on fresh signs of turbulence, with a flight to the safe haven US dollar and crude oil prices the highest in a decade.
Meanwhile, wholesale gas prices hit record highs in Britain and the EU. Britain’s National Balancing Point (NBP) benchmark soared above 500p per therm at one point, smashing the previous all-time high set in December, amid a prolonged surge that caused a series of domestic gas suppliers.
The FTSE 100 index in London ended Friday down 251 points at 6,998, down 3.5%. The German and French stock markets fell more than 4%, dragging Frankfurt’s Dax to its lowest levels since the end of 2020, while the Italian index tumbled 6.2% to its lowest level in more than a year. year. The European Euro Stoxx 600 index closed at its lowest level in nearly a year.
Nervous investors were taking little risk ahead of what they expect will be another tough week when markets reopen on Monday.
Liam Peach, emerging markets analyst at Capital Economics, said: “Russia has descended into chaos and we will have a clearer picture next week of the impact the sanctions are having on the economy. A repayment of dollar bonds by Gazprom on Monday will be a litmus test of the willingness of the government (and government-linked companies) to pay foreign debt, while inflation figures for the past week (expected Wednesday) are likely to show that the collapse of the ruble has started to drive up inflation.
Michael Hewson, chief market analyst at CMC Markets UK, said: “The FTSE 100 experienced a week-long shock, posting its biggest decline since March 2020, and below the 7,000 level at its lowest point. low since August of last year. In terms of weekly performance, the best performers were in defense and materials, with weekly gains for BAE Systems and companies like Glencore, Rio Tinto and Antofagasta.
Mining and energy stocks benefited from the surge in commodity prices, which saw the price of Brent crude hit $120 a barrel at one point. After jumping $25 a barrel last month, the price of crude ended the week at $115 a barrel. Wheat prices hit a 14-year high, while corn prices hit their highest level in eight years.
Stephen Brennock, of oil broker PVM, said: “Russia’s invasion of Ukraine means supply fears will remain front and center.” He said there was a “new sense of urgency” for the West to try to strike a nuclear deal with Iran.
Russia’s military invasion of Ukraine more than a week ago has heightened recession risks for the US and European economies – and even more so for Russia, which has been economically isolated by expanding trade. sanctions, economists said.
US stocks on Wall Street also fell as concerns over an escalating conflict in Ukraine overshadowed the latest nonfarm payrolls data which showed a strong recovery in job growth last month and a drop in the unemployment rate to 3.8%.
As stock markets tumbled, investors piled into investments seen as safer – gold, currencies like the dollar and yen and government bonds. UK 10-year government bonds posted their biggest weekly rise in more than a decade. As gilts were in demand, that pushed their yields, or returns to investors, to their highest level since November 2011. Yields fall when bond prices rise.
In the foreign exchange markets, the pound lost 1% against the dollar at $1,3210. The war in Ukraine has boosted demand for safe-haven investments such as gold. Spot gold rose 1.5% to $1,965 an ounce.
The Moscow stock exchange remained closed all week, while the ruble fell to record lows amid broader sanctions against Russia. The ruble hit a record low of 118.35 to the dollar in Moscow on Thursday and ended the week at 105 to the dollar.
Caleb Thibodeau of Validus Risk Management said: “Becoming arguably the most serious security threat to continental Europe since World War II, Russia’s invasion of Ukraine could not have happened at a more economically precarious time for the EU.