The London stock market has suffered its biggest weekly losses since the global pandemic began in March 2020, as investors feared escalating conflict in Ukraine.
The city’s stocks plummeted after reports of a fire and Russian conquest of Ukraine’s Zaporizhia Nuclear power plant, with the one-day loss of more than 250 points in the FTSE 100 index taking the weekly loss to 6.7%.
European stock markets also fell sharply on fears that the effects of fighting in Ukraine would spread west across the continent. World Bank President David Malpass told the BBC the war was a “disaster” for the global economy.
Currency and commodity markets also ended the week amid fresh signs of turmoil, with a flight to safe haven US dollars and crude oil prices at their highest in a decade.
Meanwhile, wholesale gas prices hit record levels in both the UK and EU. The UK’s National Balancing Point (NBP) benchmark rose above 500p a year at times, breaking the previous all-time high set in December amid a sustained surge that caused a number of household gas suppliers to collapse.
The FTSE 100 index in London closed 251 points lower at 6,998 on Friday, down 3.5%. German and French stock markets fell more than 4%, taking the Dax in Frankfurt to its lowest level since late 2020, while the Italian index fell 6.2% to its lowest level in more than a year. The European index Euro Stoxx 600 closed at its lowest level in almost a year.
Nervous investors took few risks before anticipating another tough week when markets reopen on Monday.
Liam Peach, Emerging Markets Analyst at Capital Economics, said: “Russia is in chaos and we will get a clearer sense of the impact the sanctions are having on the economy next week. A dollar bond redemption by Gazprom on Monday will be a litmus test of the government’s (and government-related companies’) willingness to pay off external debt, while inflation numbers for the past week (due Wednesday) are likely to reflect the collapse of the Rubles started to drive up inflation.”
Michael Hewson, Chief Market Analyst at CMC Markets UK said: “The FTSE 100 has endured a week of shock, posting its biggest decline since March 2020 and below the 7,000 mark to the lowest since August last year. In terms of weekly performance, the top performers were in defense and natural resources, with weekly gains for BAE Systems and companies like Glencore, Rio Tinto and Antofagasta.”
Mining and energy stocks have benefited from the boom in commodity prices, which has seen the price of Brent crude reach $120 a barrel at times. Crude oil prices ended the week at $115 a barrel after rising by $25 a barrel last month. Wheat prices rose to a 14-year high, while corn prices hit their highest level in eight years.
Stephen Brennock of oil brokerage PVM said: “Russia’s invasion of Ukraine means supply concerns will remain at the forefront.” He said there was a “new sense of urgency” for the West to seek a nuclear deal with the US complete Iran.
Russia’s military invasion of Ukraine more than a week ago has heightened recession risks for the US and European economies — and far more so for Russia, which has been left economically isolated by expanding sanctions, economists said.
US stocks on Wall Street also fell as concerns about the escalating conflict in Ukraine overshadowed the latest nonfarm payrolls data, which showed a sharp rise in job growth last month and a fall in the unemployment rate to 3.8%. showed.
As stock markets tumbled, investors flocked to assets seen as safer — gold, currencies like the dollar and yen, and government bonds. UK 10-year government bonds posted their biggest weekly gain in more than a decade. As gilts have been in demand, this has depressed their yields, or returns to investors, the most since November 2011. Yields fall when bond prices rise.
In the currency markets, sterling fell 1% against the dollar to $1.3210. The war in Ukraine has fueled demand for safe-haven assets like gold. Spot gold rose 1.5% to $1,965 an ounce.
The Moscow Stock Exchange remained closed throughout the week, while the ruble fell to record lows amid broader sanctions against Russia. The ruble hit a record low of 118.35 per dollar in Moscow on Thursday, ending the week at 105 per dollar.
Caleb Thibodeau of Validus Risk Management said: “Russia’s invasion of Ukraine, which has become arguably the most serious security threat to continental Europe since World War II, could not have come at a more economically precarious time for the EU.”