X

This is not a paywall.

Register for free to continue reading.

The news sucks. But your reading experience doesn't have to. Help us improve that for you by registering for free.



Please create a password or click to receive a login link.


Please enter your password or get a login link if you’ve forgotten


Open Sesame! Thanks for registering.

First Thing, Daily Maverick's flagship newsletter

Join the 230 000 South Africans who read First Thing newsletter.

We'd like our readers to start paying for Daily Maverick

More specifically, we'd like those who can afford to pay to start paying. What it comes down to is whether or not you value Daily Maverick. Think of us in terms of your daily cappuccino from your favourite coffee shop. It costs around R35. That’s R1,050 per month on frothy milk. Don’t get us wrong, we’re almost exclusively fuelled by coffee. BUT maybe R200 of that R1,050 could go to the journalism that’s fighting for the country?

We don’t dictate how much we’d like our readers to contribute. After all, how much you value our work is subjective (and frankly, every amount helps). At R200, you get it back in Uber Eats and ride vouchers every month, but that’s just a suggestion. A little less than a week’s worth of cappuccinos.

We can't survive on hope and our own determination. Our country is going to be considerably worse off if we don’t have a strong, sustainable news media. If you’re rejigging your budgets, and it comes to choosing between frothy milk and Daily Maverick, we hope you might reconsider that cappuccino.

We need your help. And we’re not ashamed to ask for it.

Our mission is to Defend Truth. Join Maverick Insider.

Support Daily Maverick→
Payment options

Goldman Team Sees S&P Down 6% if Ukraine Conflict Worse...

Business Maverick

Business Maverick

Goldman Team Sees S&P Down 6% if Ukraine Conflict Worsens

The Goldman Sachs headquarters building in New York, U.S., on Monday, Jan. 17, 2022. Goldman Sachs slumps as much as 8.9% on Tuesday, the most since June 2020, after its fourth-quarter trading revenues came in lower than expected, dragged down by an 11% decline in its equities business.
By Bloomberg
22 Feb 2022 0

“Outright conflict” in Ukraine coupled with “punitive sanctions” could push U.S. stocks another 6% lower from Friday’s close, with worse losses seen in Europe and Japan, according to Goldman Sachs Group Inc.

With geopolitical upheaval notoriously hard to trade, Goldman strategists are basing their calculations on the recent sensitivity of global assets to the ruble, according to a note Monday. Worst-case scenario, a 10% decline in the Russian currency would push oil up 13% and cause a 27-basis-point decline in benchmark Treasury yields, they said.

Traders have been piling into Treasuries and selling stocks as tension escalates near Ukraine’s border, with investors trying to hedge investments and map out possible scenarios. President Vladimir Putin’s recognition of two self-proclaimed separatist republics could scupper the chance of European-mediated peace talks, with rising energy prices intensifying the risks to growth and higher inflation.

Russia has repeatedly denied it intends to attack Ukraine.

Treasuries Rally to Send 10-Year Yield Under 1.90% on Ukraine

“Although Russia/Ukraine tensions appeared to affect primarily local assets in January, spillovers to global assets have been much more obvious in February,” wrote a team including Dominic Wilson. “If risks flare up further, and we shift to an outright conflict scenario coupled with punitive sanctions, the build in political risk premium would very likely extend.”

Potential for Russian conflict weighs on the ruble and U.S. stocks

Also in Goldman’s worse-case scenario: A fall of about 9% for European and Japanese equities, an almost 10% slump in the tech-heavy Nasdaq and a 2% decline in the euro against the dollar, according to the analysis.

Conversely, a “de-escalation scenario” would see the ruble strengthen, U.S. stocks rise about 6% and Treasury yields jump, the note said.

Ruble Guide

Goldman’s downside estimates are based on calculations that the Russian currency is still more that 10% away from its most undervalued level of the last two decades. That’s a “conservative benchmark”, according to the strategists.

The ruble has weakened more than 3% since Friday, while U.S. equity futures have fallen roughly 1.5% and are close to a technical correction for the year. A burst of haven demand for Treasuries has snapped the rise in benchmark 10-year yields, bringing them back below 2%.

U.S. markets were closed for a holiday Monday and investors are awaiting signals from a meeting of the United Nations Security Council Monday night, amid news the U.S. has evacuated State Department personnel and embassy operations from Ukraine to Poland.

“Effectively, we wait for sanctions on Russia from the West, that would introduce a heightened level of financial instability into global markets,” said Kyle Rodda, analyst at IG Markets Ltd. “Then the retaliation of gas supplies being cut to Europe, which is where surging prices could destroy demand and spark greater inflation.”

The Goldman projections chime with comments Monday from Deutsche Bank AG strategist Jim Reid, who suggested typical geopolitical selloffs in the S&P 500 Index are around 6% to 8% on average in magnitude. It takes around three weeks for stocks to reach a bottom and another three to recover from prior levels, he said, citing an analysis from the bank’s strategy team.

Gallery

Comments - share your knowledge and experience

Please note you must be a Maverick Insider to comment. Sign up here or sign in if you are already an Insider.

Everybody has an opinion but not everyone has the knowledge and the experience to contribute meaningfully to a discussion. That’s what we want from our members. Help us learn with your expertise and insights on articles that we publish. We encourage different, respectful viewpoints to further our understanding of the world. View our comments policy here.

No Comments, yet

Please peer review 3 community comments before your comment can be posted