On the edge

Many equity markets have just recorded their best week since 2020 with gains of around 6%. The “fear index”, the VIX, has fallen back below the level it was at before the start of the Russian offensive in Ukraine, long rates are at their highest levels for nearly 3 years in the United States, 4 in the euro zone, the price of gold and the US dollar are clearly down from their recent peaks (the EUR/USD exchange rate is around 1.1050).

Meanwhile in Ukraine, the inhabitants of the city of Mariupol are refusing to lay down their arms to the Russian army and the fighting is more violent than ever. Oil prices are rising sharply, China is struggling with the pandemic and the real estate crisis, and European industry is facing growing shortages that are certain to slow production significantly.

The economic calendar is not likely to hold the markets’ attention at the beginning of this week. They should therefore focus more than ever on the consequences of the war and in this case, a reversal of the trend would seem logical.