The price of oil seems to have no ceiling, electricity is becoming more expensive for individuals and companies, multinationals are fleeing Russia, supply chains are once again under tension, and economic growth is suffering. The effects of the Russian invasion of Ukraine have returned nervousness in the last two weeks to some markets that promised them very happy in the face of the relaxation of pandemic restrictions. This Tuesday, the Ibex 35, in something that has ceased to be exceptional since the war began, began the session with falls close to 1%. This was in the wake of Monday’s poor closing in the United States and the declines in Asia. However, shortly after, in a sharp reaction also typical of these days of extreme volatility, it recovered ground, and closed the day with a rise of 1.82%, to 7,783 points.
The Spanish selective is the one that has performed best among the large European indices. The Eurostoxx 50, which brings together the largest companies on the continent, the German Dax 30 and the French Cac 40 closed practically unchanged. On Wall Street, on the other hand, optimism returns. Both the Dow Jones and the technological Nasdaq show increases close to 1%.
Solaria and Siemens Gamesa have been among the best values of the Ibex with advances of more than 9% and 7% respectively. Both have an important renewable energy business, which can gain prominence in the midst of the search for alternatives to energy dependence on Russia. Inditex, badly hit by its exposure to the country led by Vladimir Putin, where it has suspended the activity of its 502 stores, is among those that recover the most, such as IAG, under pressure from the rise in fuel prices. Banks, heavily penalized in recent sessions, come back with CaixaBank and Bankinter in the lead.
The Ibex thus breaks a streak of three consecutive days of falls. Investors give a truce when they consider that there may be opportunities after the debacle of the last few days, which has left the prices of many companies on the floor -the Ibex still loses 10% so far this year-, although they still observe with nervousness the escalation of gas and oil prices.
This Tuesday, Brent crude, the reference in Europe, rose more than 7% to 132 dollars. The strong revaluation of energy not only hits companies that use fuel in their activity in an obvious way —as in the case of airlines—; it also causes companies’ energy bills to rise, to which industry is particularly sensitive, and implies a transfer of funds from European consumers to energy-producing countries, which undermines their ability to spend on other products and services, affecting thus to growth. Added to this is the tendency of consumers to be more conservative, and of investors to postpone disbursements, in an environment of war at the gates of the European Union’s borders.
The decision of the United States and the United Kingdom to impose a veto on the purchase of Russian oil to try to drown Moscow’s finances, announced on Tuesday afternoon, is the latest concern in the markets. The high European dependence on Russian supply, without which countries like Germany would have a very difficult time keeping heating, transport, electricity and industry running, means that Europe has not yet joined this initiative. An authoritative voice like that of former ECB Vice President Vítor Constâncio has warned that Europe will suffer a recession if it follows in the footsteps of Washington and London.
He knows in depth all the sides of the coin.
The eventual entrenchment of the war is also worrying. If the conflict drags on and the sanctions are maintained for months or years, the recovery will not be as powerful as expected in a favorable context in other areas, with Brussels in full delivery of European funds, and with governments relaxing restrictions before the drop in covid-19 infections.