March 25, 2022
Kinvestor Market Recap: Your Weekly Market Summary for March 21-25
Thursday marked one month since Russia first invaded Ukraine, sparking war in the country along with supply chain shortages, sanctions, and energy concerns across Europe.
The European Union and its allies have been imposing sanctions on Russian goods since the beginning of the conflict, including the most recent announcement of sanctions against defense companies and members of the Russian elite, among others. To address their dependence on Russia for commodities, the EU announced a deal with the United States on Friday for liquid natural gas as Europe faces unprecedented energy shortages. Currently, the EU relies on Russia for about 40% of its gas needs, but is planning to decrease its dependency on Russia by two thirds this year, ending all fossil fuel imports from Russia by 2027.
In response to the EU’s current shortage and future plans to weaken ties with Russia, the United States has agreed to supply up to 15 billion cubic metres of liquefied natural gas (LNG) to the EU this year as it “weans off” Russian energy supplies. While the U.S. will facilitate this supply, officials did not specify how much of the supply would come from the United States itself. The Middle East, also a major supplier of natural gas and diesel fuel, most often has a surplus of its supply, and could be a source of fossil fuels for Europe as it transitions away from dependence on Russia.
This week has been volatile for the energy sector as uncertainty continues to spread. While both Brent Crude Oil and WTI were up on Wednesday, closing at their highest since March 8, crude prices fell another 2% on Thursday as the EU was unable to come to a consensus in its plan to boycott Russian oil. Among the countries most affected by a Russian oil boycott are France, who in 2020 received one quarter of its 25 million tonnes of diesel from Russia; the United Kingdom, with 18% of its diesel supplied by Russia in 2020; and Germany, whose situation is more complicated with nearly 30% of its diesel in 2020 imported from Russia.
Energy & Commodities in the Markets
As of Friday morning, WTI was down 2% to US$110.09 per barrel and Brent Crude was down 1.96% to US$116.70 per barrel.
Gold and silver prices were trending down early on Friday, which Kitco reports was due to routine downside price corrections following recent good gains. As of Friday morning at 10:38 am ET, Gold is down 0.51% to US$1,957.70/t oz. and silver is down 1.10% to US$25.64/t oz.
Other Market Trends of the Week
This week marked the return of the “meme stocks” that made a wave in retail investing last year. GameStop Corp. (NYSE:GME), AMC Entertainment Holdings (NYSE:AMC), and other stocks popular with retail investors are seeing gains once again, with GameStop up 14.5% on Wednesday, boosted after Chairman Ryan Cohen disclosed that his investment company bought 100,000 shares in the retailer. The announcement also appeared to extend the 30% rally on Thursday.
Like GameStop, AMC ended the day up 13.6% on Wednesday, making it one of the most trending stocks on stocktwits.com, a retail investor-focused website. Other stocks, such as Blackberry, that also have a history of being popular with retail investors, also experienced mild gains between 1.4% and 4.2% this week.
“This has probably occurred because we’re in a weak market environment, likely investment managers who short are looking for opportunities and they’ve gone back to those historically tried and true names,” Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York, told Reuters.
With inflation continuing to rise in the United States as conflict in Europe causes political uncertainty, the country’s mortgage rates continue to climb to a three-year high. This week, the 30-year fixed-rate mortgage averaged 4.42%, up from 4.16% in the previous week, as mortgage rates across all loan types continue to rise. George Ratiu, Realtor.com’s manager of economic research, told CNN, “The main takeaway is that mortgage rates are likely to push toward 5.0% before the end of the year, with lenders anecdotally reporting quotes around 4.75% for the 30-year fixed rate.”
Canada’s Green Bond Debut
In Canadian news, the government announced that its inaugural Green Bond Framework, which was announced on March 3, was met with marked success, gathering more than double the CA$5 billion green bond by Thursday. The final framework included orders for more than $11 billion (US$8.75 billion) in this major step towards financing the government’s investments in green infrastructure and projects that help combat climate change, while also boosting Canada’s economy.
The Honourable Steven Guilbeault, Minister of Environment and Climate Change, commented, “Canada’s green bonds are a major step in our plan to grow the sustainable finance market in Canada. Green bonds allow investors to take advantage of the many emerging green market opportunities by adding climate-friendly products to their portfolios. Expanding private sector investments through a sustainable finance market in Canada is key to achieving a cleaner, net-zero economy.”
The Canadian dollar, for its part, reached nearly US$0.80 on Wednesday before steadying on Thursday, the highest it’s been since January, and remains on track to gain as of noon on Friday.
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