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Russia Sanctions Send Ruble And Stocks On A Dive, Central Bank Hikes Rates

By Cristian Bustos. Originally published at ValueWalk.

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The ensuing economic sanctions on Russia after the invasion of Ukraine are creating mayhem across the globe. As oil prices went up, the Russian ruble dropped to a record low while world stocks have taken a hit as the country’s central bank is hiking rates.


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Market Turmoil

According to Reuters, world markets have taken a big hit as the pan-regional STOXX 600 index tumbled 1.10% and European banks were shaken by Russian sanctions over the invasion of Ukraine. Oil jumped 5%, while the ruble dropped by 32% —the lowest on record.

In response —and to tackle soaring prices— Russia’s central bank increased interest rates from 9.5% to 20%, the highest in this century.

European banks were most affected, “with those most exposed to Russia, including Austria’s Raiffeisen Bank International AG (VIE:RBI), UniCredit SpA (BIT:UCG) and Societe Generale SA (EPA:GLE), falling between 11 and 15%.”

While the Nasdaq Composite (INDEXNASDAQ:.IXIC) gained 0.04%, the S&P 500 (INDEXSP:.INX) dropped 0.65% and the Dow Jones Industrial Average (INDEXDJX:.DJI) went down 0.93%.

Regarding the sanction, a senior U.S. administration official said, “Our strategy, to put it simply, is to make sure that the Russian economy goes backward as long as President Putin decides to go forward with his invasion of Ukraine.”

Safe-Havens

In a note to clients, Solita Marcelli, chief investment officer for the Americas at UBS Global Weather Management, said: “Investors trying to trade off geopolitical events can easily get whipsawed,” since sell-offs during similar events have been short-lived.

The impact of the Russian sanctions over oil prices was felt on Monday as Brent crude futures climbed by 2.9% and hit the $100.77 mark, since the conflict is raising fears of supply disruptions in the Eurasian giant.

“U.S futures rose 4.35% to $95.57 per barrel after hitting their highest since 2014 last week,” Reuters informed.

Christopher Smart, chief global strategist at Barings Investment Institute, said, “If Russian entities are effectively blocked from exchanging their money into the world’s reserves currencies, will the Russian government allow the foreign debts to be paid?”

Amid fears of market volatility, investors are turning to sovereign bonds as safe-havens are on the way up, with increasing investment coming from the dollar, Swiss franc Japanese yen, while gold jumped 1.45% and hit ca. $1,915.00.

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