Ukraine’s surprise comeback could boost markets

European markets closed higher on Friday, as did markets in the Asia-Pacific region. The Dow (UNDUE) jumped more than 200 points in the United States and the major indexes appeared on track to end a three-week recession.

Stock prices tend to rise on news of Ukrainian gains or improvement on the ground, said Joseph Brusuelas, chief economist at RSM US.

Ukrainian President Volodymyr Zelensky claimed on Friday that the country’s military had recaptured more than 1,000 square kilometers of territory since the start of this month, as it continues to press in the Kharkiv and Kherson regions.
Over the past three days, Ukrainian forces have hoisted their country’s flag in the Kharkiv settlement of Shevchenkove, a major Russian logistics hub inside Ukraine, according to a photo geotagged by CNN.

If you chart those three days on the direction of the market, said Quincy Krosby, chief global strategist for LPL Financial, it’s clear that’s a contributing factor to the stock gains. “It’s good news, even at the margins,” she added.

Russia’s invasion of Ukraine has slowed global growth and increased inflation due to major energy supply disruptions – Russia accounts for well over 10% of global oil and natural gas production . Grain supplies were also disrupted, leading to a spike in commodity prices.

A shock to energy prices and the central bank’s pivot to fight inflation in Europe further weakened investor sentiment. Recessions now look certain in Europe as gas prices continue to accelerate through the winter.

The war in Ukraine has been mentioned as a factor in about 250 downgrades to S&P Global’s credit ratings or outlook since it began in late February. Rising energy costs and interest rates globally mean the impact is likely to spread.

“This lack of energy is expected to cause the European Union economy to plummet significantly this winter. Europe in recession will affect US commerce,” said Anthony Denier, CEO of Webull. “But, if Ukraine continues to post victories, the gas problem could be solved and everyone will be happy. So people are buying stocks today.”

The ongoing struggle in Ukraine is just one of several factors impacting markets in a week filled with central bank news, policy changes and new economic data.

Investors cheered on Thursday when the UK confirmed a plan to subsidize household and business energy bills. There is also growing expectation that there will be fiscal support across the European Union to deal with the energy crisis, which has boosted global stock prices.

Still, the war could drag on for some time, and Ukraine’s winning streak does not mean that the problems posed by the war will end anytime soon. Investors made themselves understood. The markets want to see an end to this war.

President Zelenskiy seems to understand this sentiment. He remotely rang the New York Stock Exchange opening bell on Tuesday as traders cheered and cheered him on.

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