Ukraine

The four leading international consultancy firms, known as the Big Four, have joined a growing list of companies that this week decided to cut their ties with operations in Russia because of the invasion of Ukraine.

PWC, KPMG, Deloitte and Ernst & Young collectively employ some 14.000 staff in Russia. The companies said ties with its Russian business will be severed, letting these operation continue but no longer as part of their networks.

Mutual funds and ETFs investing in Russian stocks and bonds posted unprecedented losses last week after Russian president Vladimir Putin decided to invade Ukraine. Managers of emerging market funds with Russia exposure are now also closely watching the effects of potential withdrawals and may face liquidity challenges now that the EU and US have collectively decided to remove Russia from the international payments network Swift.

For a second time in two years, investment fund managers have been ordered to directly report significant redemptions as the CSSF, the Grand Duchy’s financial supervisor, stepped up its monitoring of the impact from the war in Ukraine and the international sanctions against Russia.

Russia ETFs or funds are dropping out of the market in droves. Some are still open, as market makers manage to keep them barely alive. But for how much longer?

Switzerland, long a place for Russian oligarchs to park their money, announced Monday it would set aside its long-standing and deeply-rooted tradition of neutrality in order to freeze Russian financial assets in the country, as the fast-moving international reaction to Russia’s invasion of Ukraine continues. In so doing, it joined the European Union and a growing list of countries attempting to penalise Russia, as Luxembourg drew its financial sector’s attention to several EU sanctions measures.

Luxembourg fully supports the European Union’s additional sanctions against Russia over its aggressive move towards Ukraine but supports a cautious approach with the EU’s plans to eject Vladimir Putin’s country from the international payments system Swift. If that happens Russia will in essence be cut off from the world economy.

Western leaders are struggling with their response to Putin’s latest challenge. They agree that it should look like a unified position. In this respect, they are mainly writing down measures that the United States and Western Europe are prepared to take if Russia takes the next step. In this context the combination of French boasting and German passivity is not a happy one.

Global financial markets were in turmoil on Thursday in a clear sign that investors had not expected Russian President Vladimir Putin to make an aggressive move into Ukraine by launching a full-scale invasion.

“Even just yesterday people were dismissing this as unlikely,” well-known economist and Fed watcher Mohamed El-Erian, advisor at the Allianz & Gramercy said. “This is way beyond anything. This is a very unsatisfactory situation.” 

Conventional stock market wisdom says investors should buy when the cannons roar and sell when the stock market hears the clarion call. The cannons are literally roaring today. But does this reasoning hold true?

Author Ben Carlson has written extensively on the relationship between war and stock market performance. However, the relationship between geopolitical crises and market performance is not as obvious as you might think, he argues.

In periods of low interest rates, high stock market prices and persistent inflation, the usually volatile commodity markets are once again in the sights of investors. This is also the case now, but this time there is another complicating factor: 100,000 Russian soldiers on the border with Ukraine, which the US president expects to invade the neighbouring country.