Financial Markets Reaction to Russo-Ukrainian War

Dear Colleagues,

The war in Ukraine has set back the global response to and the recovery of the global economy from the COVID-19 pandemic. The waves of tectonic economic instability unleashed by the Ukraine conflict have caught the global players of politicians, central bankers, economists and investment analysts off guard. Immediately after the invasion, financial conditions tightened for emerging markets and developing countries (Yousaf et al., 2022). Russia’s invasion of Ukraine has slowed global growth and raised inflation. Financial stability conditions in the Euro area have worsened, as the Russian invasion of Ukraine has led to higher energy and commodity prices and increased risks to Euro area inflation and growth, as concluded by the May 2022 Financial Stability Review (FSR) published by the European Central Bank (ECB) (European Central Bank, 2022). Interest rates are soaring around the world and bonds that are supposed to be safe and stable suddenly turn volatile. Bond price is inversely proportional to interest rates; therefore, due to heightened tension, investors have been selling Russian dollar-denominated bonds (Umar et al., 2022). As a result, the yield has doubled to 8.3 per cent, as shown by Bloomberg data. As a result, the US Treasury bond yield has gone down due to heavy demand by investors who are in search of a relatively safer asset. The three major U.S. stock indexes have closed up collectively, with the Dow Jones industrial average, the S&P 500, and the NASDAQ up 2.51%, 2.24%, and 1.64%, respectively. European stocks also rallied, with Russia’s RTS index up 26.12% after tumbling more than 50% during the previous session, while the UK’s FTSE 100, France’s CAC 40, and Germany’s DAX all rose more than 3% (Alloway, 2022). The prices of gold, crude oil, and other safe-haven commodities all fell sharply and gave up their sharp gains from the first trading day. The continued rise in energy prices will likewise further push up the level of inflation, posing long-term risks for its financial market (Ahmed et al., 2022). This will further increase the difficulty of monetary policy implementation and bring instability to the capital market.

This Special Issue will foster and promote state-of-the-art research on the impact of the Russia–Ukraine conflict on financial markets in the following areas:

• The impact of the Russia–Ukraine war on the global financial markets;
• Investor sentiment and stock market reactions to the Russia–Ukraine crisis;
• Resilience of the financial system; 
• Supply chain distortions;
• Credit and asset management;
• Energy prices and security of supply;
• Cross-currency payments;
• Safe havens and hedges during war crisis periods;
• Affects supplying liquidity to financial markets;
• The impact of war on energy prices, inflation and growth amplifying existing vulnerabilities;
• Banks facing weaker profitability after a strong recovery in 2021.

References

Ahmed, S., Hasan, M. M., & Kamal, M. R. (2022). Russia–Ukraine crisis: The effects on the European stock market. European Financial Management. 2022, 1–41. https://doi.org/10.1111/eufm.12386

Alam, M. K., Tabash, M. I., Billah, M., Kumar, S., & Anagreh, S. (2022). The Impacts of the Russia–Ukraine Invasion on Global Markets and Commodities: A Dynamic Connectedness among G7 and BRIC Markets. Journal of Risk and Financial Management, 15(8), 352.

Alloway, T. (2022, September 28). Everyone’s a Rates Trader Now as Big Bond Moves Engulf the Globe. Bloomberg. Available at: https://www.bloomberg.com/news/articles/2022-09-28/everyone-s-a-rates-trader-now-as-big-bond-moves-engulf-the-globe#xj4y7vzkg

Eurosytem. (2022, May 25). Russia-Ukraine war increases financial stability risks, ECB Financial Stability Review finds. European Central Bank. Available at: https://www.ecb.europa.eu/press/pr/date/2022/html/ecb.pr220525~fa1be4764d.en.html

Umar, Z., Polat, O., Choi, S. Y., & Teplova, T. (2022). The impact of the Russia-Ukraine conflict on the connectedness of financial markets. Finance Research Letters, 102976.

Yousaf, I., Riaz, Y., & Goodell, J. W. (2022). Energy cryptocurrencies: Assessing connectedness with other asset classes. Finance Research Letters, 103389.

Dr. Mosab Tabash
Dr. Krzysztof Drachal
Guest Editors

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• stock market reaction
• bond yields
• inflation
• cross-currency
• liquidity supplying
• credit management
• asset management
• supply chains
• energy price
• bank performance