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Relief rally fizzles as Ukraine goes into a State of Emergency


Markets in Europe at one point today appeared to be putting to one side their concerns about events in eastern Ukraine, choosing instead to focus on a raft of decent company updates, and the positives of a series of sanctions that were lighter than expected.


The news that Ukraine is implementing a 30-day state of emergency didn’t appear to undermine the more bullish mood in the morning session, however this changed in the afternoon session, when the DAX, which had been leading today’s move higher, saw all of its gains wiped out in 30 minutes after reports that Ukraine was experiencing a DDOS attack, in what could be a precursor to an invasion.

The Ukrainian government then released the details of its state of emergency, which starts at midnight tonight, calling up all its reservists, as well as imposing restrictions on movement throughout the country, in a sign that it expects to see an imminent escalation, pulling European markets down as we head into the close, with the FTSE100 trying to hang on to at least some of its gains.      

This change of tone perfectly encapsulates the clear and present danger of headline risk with respect to market ebb and flow, as investors nervously eye Russia’s next move.

Earlier this year Barclays shares hit their highest levels since April 2018 but have since slipped back. With the departure of Jes Staley, new CEO Venkat has the opportunity to make his own mark on a bank that has had its fair share of problems but now appears to have found a business model, where all of its divisions are performing well. Today’s Q4 numbers have seen pre-tax profits come in at £1.4bn, more or less in line with expectations, thus pushing annual profits up to a record £8.4bn, up from last year’s £3.1bn. Total revenues came in at £21.9bn, a modest increase on last year, however operating costs rose to £14.4bn.

The UK bank saw a decent performance, profits here rising to £2.47bn, helped by an increase in total income which was driven by higher mortgage demand, although a modest decline in net interest margin took some of the edge off. Income from credit card balances fell as consumers cut back on credit card spending and reduced their balances. Total loans to customers rose to £208.8bn, with most of that driven by the sale of mortgages.

The investment bank was somewhat of a mixed bag in terms of annual revenues. The equities business saw a 20% rise in income, rising to just shy of £3bn, however FICC (fixed income) fell by 33% to £3.45bn. Investment banking helped to offset this underperformance, with a big jump in advisory fees and other capital markets activity, which pushed up income by 34% to £3.66bn. The bank said it plans to buy back $1bn of its shares as well as proposing a 6p dividend for 2021.

Aston Martin shares initially moved higher after reporting a 5% rise in sales in Q4, and annual sales of 6,178 vehicles. This is an 82% increase on last year, while annual revenues have risen 79% to just shy of £1.1bn. Losses before tax have been reduced to £213.8m, a decent improvement on last year’s £466m deficit, although a rise in net debt to £891.6m, due to higher debt costs appears to have raised concerns about its ability to grow its margins, dragging the shares lower on the day. The company said it remains on course to meet its 2024/25 targets of 10,000 in sales, and £2bn in annual revenues. For 2022, Aston says it expects to have sales of 6,600 cars.

Is there light at the end of the tunnel for Ted Baker? It’s been a slow road back for the new management team as they look to turn around a business riven by scandal and stock accounting errors. It certainly looks like progress is being made, with the shares up strongly after today’s Q4 trading update showed that group sales rose 35%, compared to a year ago, and up from the 18% rise in Q3.

Margins are also looking better, rising 350bps across all channels. Inventory levels appear to be under control while sales in stores and retail showing signs of recovery as volumes start to head back to pre-Covid levels, despite a turn down in December due to the Omicron surge.  

Darktrace shares are also higher after announcing it had paid €47.5m for Cybersprint, an attack surface management company based in the Netherlands. The platform automatically detects, maps and searches for all digital assets related to a company’s brand, and identifies weaknesses or other vulnerabilities.  

Rio Tinto has underwhelmed despite posting record profits of just over $21bn, a 116% increase on 2020, as well as announcing a huge total dividend of $10.40c a share, an 87% increase on last year. This shouldn’t really be a surprise given the big rises we’ve seen in commodity prices over the last 12 months with copper, iron ore and aluminium in huge demand.

In terms of the outlook Rio expressed uncertainty about the outlook for iron ore pricing, along with higher production costs at its Pilbara operation, although the outlook for aluminium and copper was more positive due to their roles in the transition to renewables.

Having seen a decent rebound yesterday Evraz shares are down again on reports that major shareholder Roman Abramovich might find himself on the receiving end of sanctions if the situation between Russia and Ukraine were to escalate.   


The recovery in European markets has seen US markets open higher after the S&P500 closed at its lowest level in over six months, however the headlines out of Ukraine have seen these gains erased with the Nasdaq 100 retesting and on the cusp of breaking below its January lows.

Amongst some of the better performers Virgin Galactic shares have rallied strongly, after four successive daily declines after Q4 numbers came in better than expected. Losses came in at $81m, compared to $144m a year ago, although revenue fell short of expectations, coming in at $141,000, over half of what had been expected. The space tourism company played down the miss on revenues saying that demand for its flights remained strong, and that they remained on track to launch a commercial service later this year.  


The New Zealand dollar has been the best performer after the RBNZ raised rates by 25bps to 1% in its meeting overnight. While this wasn’t unexpected, the more hawkish outlook for the central bank was, with the committee saying that they came close to hiking by 50bps due to concerns about the continued upward pressure on inflation expectations.

With the Bank of Canada and RBA also both due to meet next week, both the Australian and Canadian dollar are both higher as expectations increase over a change of policy here in the next week or so. The odds are already increasing for a Bank of Canada move next week, ahead of the Federal Reserve later in the month. While we don’t expect any move from the RBA next week, its highly likely they will have to shift their guidance on the prospect of a rate rise this year, simply because their current guidance of no rate hike before 2023, isn’t remotely credible in the current environment.


The more positive tone in equity markets initially exerted downward pressure on gold prices after this week’s move to one-year highs, however this is proving to be short-lived, with dips back to $1,890 currently being bought into, and this afternoon’s state of emergency announcement from Ukraine pulling prices back higher again.

Crude oil prices were initially caught in a bit of a no-man’s land today after yesterday’s move up to $99, suddenly saw a retreat back from 7-year highs. The pullback came about when the expected sanctions that came into play turned out to be much milder than had originally been feared. Prices have since edged higher again this afternoon as news of a DDOS on Ukraine prompted a sharp move back towards the highs.


Although the Ukraine situation remains very much front of mind, looking a little beyond that, Car maker Volkswagen saw elevated price action on Tuesday after announcing that it planned to spin out the Porsche brand in an IPO. The underlying added more than 13% on the back of the news, driving one day vol in the stock to 127%, up from a monthly print of a little under 64%.

Crypto vol continues to recover, with Cardano the stand-out here. Volumes are surging as the asset rebounded off one-year lows yesterday, driving one day volatility to 120%, up from a monthly figure of 89%.

As for equity indices, Germany is very much in focus, both as a result of VW’s weighting in the DAX and also given the risk appetite that we saw emerge yesterday. That left the German mid-50 to post one day vol of 53% up from a monthly figure of 33%.

Commodities seem to be playing catch up after the long weekend break in the US, with oats being the standout here. That however looks to be off the back of a spike lower for prices which wasn’t sustained but underlines the price action that can be seen coming off the back of market closures. One day vol hit 179%, more than double the 84% seen on the month.

Rounding off with fiat currencies, price movements in Dollar Rouble remain elevated and this can be expected to remain in focus as any improvement in political sentiment has scope to erase some of the Rouble’s recent losses. One day vol sat at 45% slightly down from the start of the week, but well up from a monthly print of 25%.

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