Daily Brief: Investors Are Quite Uncomfortable With How Close Russia Is Standing To Ukraine

Daily Brief: Investors Are Quite Uncomfortable With How Close Russia Is Standing To Ukraine

about 2 years ago3 mins

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The US government warned over the weekend that Russia could invade Ukraine as soon as this week.

What does this mean?

Russia has spent weeks assuring wary onlookers that it has no intentions of invading Ukraine, but this isn’t the US’s first rodeo: its government just declared that the move might only be a matter of days away. That made investors nervous – not least because Russia is the biggest supplier of natural gas to Europe, with about a third of its exports flowing through Ukrainian pipelines. It’s the world’s third-biggest oil producer too, meaning any conflict could threaten supplies of the slippery elixir. All that to say, this might be why European natural gas and electricity prices rose more than 10% on Monday, and why the price of oil hit a seven-year high.

Oil price

Why should I care?

For markets: Dinner’s on you.

Oil’s price now sits at $93 a barrel, with some analysts expecting it to hit as much as $100 by the end of February. And if that happens, Bloomberg has calculated that European and US inflation will be around half a percentage point higher in the second half of this year than it would’ve been otherwise. Consider too that Russia and Ukraine account for nearly a third of wheat and barley exports between them, which would mean any conflict could limit their supply and push overall inflation up even higher.

The bigger picture: The economy cannae take it.

Consumer spending is bound to be hit by these higher energy and food bills, which would have major consequences for economic growth. Higher inflation could likewise force central banks to raise interest rates faster than planned, which would discourage borrowing and spending even more. So Morgan Stanley might have a point: the investment bank said on Monday that the Russia-Ukraine conflict could end up pushing the global economy into recession.

Keep reading for our next story...

Life Insurance Corporation Of India Filed For An IPO

India image

Reports emerged on Monday that Life Insurance Corporation of India (LIC) is listing on the stock market, as the country agrees to pay whatever it costs to fix its broken economy.

What does this mean?

Like most countries, India has been put through the wringer during the pandemic, and its government has been trying to plug the hole in its budget ever since. So now, it’s looking to raise some money by selling off some of its assets. Enter LIC: you might never have heard of the insurance giant, but it’s a household name in India that – with over 280 million policies under its belt – controls nearly two-thirds of the country’s market. It’s also entirely owned by the government, which said it’s planning to sell 5% of the company on the stock market in hopes of raising around $8 billion. That would make it India’s biggest-ever IPO, and the fourth-biggest insurance IPO ever.

Top insurers

Why should I care?

Zooming in: Why now?

This is a bold move considering the timing. First, global stocks have had a terrible start to the year, battered and bruised as central banks threaten to withdraw their support. Second, foreign investors have been pulling their money out of India’s stocks for the last four-straight months. And third, India’s IPOs haven’t exactly been panning out: a third of new listings on the Indian stock market last year are now trading below the prices they listed at.

India IPOs

For markets: No pressure, LIC.

India’s stock market did manage to raise a record $18 billion last year, as it tried to position itself as an alternative to China for emerging market investors. But it’ll be relying on LIC to break the mold if it wants to keep that dream alive. After all, the current holder of the “biggest-ever IPO” title is Paytm, whose share price has fallen over 50% since its debut.

Paytm stock
Paytm stock | Source: Google Finance
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