European stock markets are running scared as tensions mount between Russia and Ukraine with war becoming increasingly likely. German chancellor Olaf Scholz is flying to Kiev and Moscow to try to pull both nations back from the precipice, yet the US says war could start within days.
Throw in the rising interest rates cycle and the US registering the highest headline inflation number in over 40 years, 7.5%, and there is an awful lot for investors to think about. ‘Currently, markets are pricing in more than six rate hikes by the end of the year instead of less than two, three months ago,’ said George Lagarias of accounting specialist Mazar’s.
Travel stocks are bearing the brunt, with International Consolidated Airlines (IAG) and TUI (TUI) down 7% or so, Wizz Air off 9%. ‘A war in Europe would put people off going on holiday a bit, but also cause disruption to air space,’ said Markets.com’s Neil Wilson.
RECOVERY AND VALUE
Growth and technology stocks have been largely out of favour for several months now, putting cyclicals front and centre in investor thinking. This can be clearly seen from the FTSE 350’s best performing stocks so far this year.
Beyond the obvious reopening plays - Cineworld (CINE) and EasyJet (EZJ) - rampant oil prices have played well for BP (BP.), Shell (RDSA), and Wood Group (WG.), the latter proving services to the wider industry players, while banks with large Far East exposure show up.
And let’s not forget Vodafone (VOD), in the investment doghouse for years but maybe now starting to gradually convince the markets that its operational metrics are heading in the right direction.
