Risk Rallies as Tensions Cool

Shares rallied and commodity prices eased overnight following promising developments in the Ukrainian conflict.

Oil prices tumbled after OPEC member United Arab Emirates declared support for production increases to meet shortages induced by sanctions on Russia.

These developments saw traders breathe a sigh of relief, and investors proceeded to enthusiastically buy the dip. 

German shares led Europe higher after the Ukrainian president said his country could accept “neutrality”, one of Russia’s demands for peace. The remarks gained additional significance from the arrival of the Russian foreign minister in Turkey for talks with his Ukrainian counterpart.

A quick resolution of the current conflict would soothe market concerns about disruption and inflation, illustrated by a more than 7% lift in the German DAX during the session.

The UAE’s US ambassador said the Emirate will call on fellow OPEC members to increase production to ensure stability in energy markets.

This change in stance prompted an immediate drop in crude oil prices. Both Brent and West Texas contracts fell by as much as 17%, before closing off their lows.

Lower energy prices are a double win for the global economy. Higher prices potentially destroy demand and choke off growth, while simultaneously driving inflation higher.

The easing of concerns and a more promising outlook in eastern Europe sparked the surge in positive market sentiment. However, the elevated volatility may mean this is respite rather than resolution.

Market insights and analysis from Michael McCarthy, Chief Strategy Officer at Tiger Brokers Australia

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