Powerful sanctions hit risk appetite

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Powerful sanctions hit risk appetite

We’re seeing widespread risk aversion once more on Monday after new severe sanctions were levied against  over the weekend.

The response to previous sanctions was underwhelming, to say the least, but the latest batch undoubtedly has the teeth that the others lacked. That’s been most clearly evident in the FX markets, where the rouble plunged more than 30% to record lows and that could have been much worse but for swift action by the central bank.

An emergency rate hike – raising the key rate from 9.5% to 20% – alongside other measures, has enabled the rouble to pare those initial losses but the currency remains under severe pressure. The latest sanctions are hard-hitting and will weigh heavily on the economy. And that’s before we see the second-round effects.

BP has shown us today the political pressure that companies are going to be under to sever ties with , especially where there’s shared interest with the Kremlin. The level of horror at the events in e being experienced around the world, combined with that political pressure, will continue to see companies cut ties which will compound the impact of the sanctions.

Whether we continue to see more risk-aversion in the markets may well hang on the talks currently taking place between n and ian officials. It’s hard to imagine a ceasefire and n exit being agreed upon given the events of the last week but we live in hope.

An agreement would naturally lift sentiment and we could see stocks quickly reversing their losses. A failure could see things turn ugly again as  will not take these sanctions lying down. They will have massive implications for the n economy and retaliation is almost certain.

Bitcoin lower but resilient

Bitcoin is also lower on the day as traders abandon risk assets in favour of safe-havens. It’s continuing to show resilience though which will encourage the crypto crowd. As long as it continues to weather the storm and hold above USD 30,000, there will be a belief that it can thrive again once risk appetite improves. Unfortunately, there’s just no clear idea of when that will be.

For a look at all of today's economic events, check out our economic calendar: www.marketpulse.com/economic-events/

Source: Powerful sanctions hit risk appetite