Ukrainian forces have made sweeping advances in September in their fight against Russia, easing some investors’ fears of a protracted energy crisis caused by the war in Europe.
European markets closed higher on Friday, as did markets in the Asia-Pacific region. The Dow jumped more than 200 points in the US and major indexes appeared on track to end a three-week slump.
Stock prices tend to rise on news of earnings or improvement in Ukraine, explained Joseph Brusuelas, chief economist at RSM US.
Ukrainian President Volodymyr Zelensky claimed on Friday that the country’s military has recaptured more than 1,000 square kilometers of territory since the beginning of this month as they continue to press the Kharkiv and Kherson regions.
Over the past three days, Ukrainian forces have raised their country’s flag in the Kharkiv settlement of Shevchenkove, a major Russian logistics hub inside Ukraine, a photo obtained by CNN shows.
If you map those three days to market direction, said Quincy Krosby, chief global strategist at LPL Financial, it’s clear that’s a contributing factor to the stock’s gains. “That’s good news, even at the margin,” he added.
Russia’s invasion of Ukraine has slowed global growth and increased inflation through major energy supply disruptions – Russia accounts for well over 10% of global oil and gas production. Grain supplies have also been disrupted, leading to a rise in commodity prices.
A shock to energy prices and the central bank’s drive to fight inflation in Europe have further dampened investment sentiment. Recessions now seem certain in Europe as natural gas prices continue to accelerate over the winter.
The war in Ukraine has been cited as a factor in about 250 downgrades or cuts to S&P Global’s credit rating since it began in late February. Rising energy costs and interest rates worldwide mean the impact is likely to spread.
“This energy shortage is predicted to significantly drag down the European Union economy this winter. Europe in recession will affect US trade,” said Anthony Denier, CEO of Webull. “But if Ukraine continues to score victories, the gas issue can be resolved and everyone will be happy. So people are buying stocks today.”
The ongoing battle in Ukraine is just one factor affecting markets in a week full of central bank news, economic policy changes and new economic data.
Investors cheered on Thursday when the UK confirmed a plan to subsidize energy bills for households and businesses. There is also a growing expectation that there will be fiscal support across the European Union to tackle the energy crisis, which has boosted global share prices.
However, the war could go on for quite some time, and Ukraine’s wave of victories does not mean that the problems created by the war will end soon. Investors have come clean. Markets want to see an end to this war.
President Zelenskiy seems to understand this sentiment. He remotely rang the bell at the New York Stock Exchange on Tuesday as traders clapped and cheered him.
