This content material has been produced by Opto and was initially printed on the Opto Blog.
Because the Russia-Ukraine struggle enters its second month, occasions unfolding are having main implications for markets around the globe.
Whereas the battle shouldn’t be seen as a chance to take advantage of market weak spot, there are methods to soundly navigate the disaster and handle publicity to funding threat.
With this in thoughts, there are just a few sectors and shares which have been performing effectively for the reason that battle started, and will proceed to take action. These embody defence, vitality and commodities reminiscent of meals.
Defence shares climb as spending rises
Unsurprisingly, the battle has seen a major rise in defence spending around the globe. The US is at the moment accelerating manufacturing of Javelin and Stinger missiles. The primary contractor is Raytheon Applied sciences [RTX].
On its fourth quarter 2021 earnings name in January, Raytheon’s CEO Greg Hayes indicated that the corporate may stand to revenue from the Russia-Ukraine struggle and different geopolitical conflicts: “[W]e are seeing, I might say, alternatives for worldwide gross sales.”
Hayes’ feedback drew criticism, however in an interview with Harvard Enterprise Assessment in March, he doubled down: “Look, we don’t apologise for making these methods, making these weapons. The very fact is, they’re extremely efficient in deterring and coping with the risk that the Ukrainians are seeing at this time.”
The Raytheon share worth is up 16% year-to-date and closed on Monday 4 April just a few share factors down from its 52-week excessive of $104.34 set on 1 March.
The Lockheed Martin [LMT] share worth was up 25.8% year-to-date as of 4 April, however the shares of defence contractors Boeing [BA] and Airbus [AIR.PA] are down 5% and a couple of%, respectively, over the identical interval. That is largely because of their publicity to the industrial aviation trade. It’s been reported that Russia had 62 plane on order from the businesses, which are actually unable to be delivered.
European vitality shares profit from shift away from Russian provide
As Europe tries to wean itself off Russian oil, many European vitality shares have made beneficial properties.
Électricité de France [EDF.EPA] could also be down 17.7% for the reason that begin of 2022 on the shut on 4 April, but it surely’s up 6.9% up to now month and 16.9% above its 52-week low set on 7 March.
The share worth of Danish energy firm Ørsted [ORSTED.CPH] was up 9% up to now month as of 4 April, though down 0.7% since 1 January. It has climbed 24.7% since setting a 52-week low on 24 February.
The battle has additionally crystalised the necessity for the UK, EU and US to depend on various vitality sources. This might profit nuclear shares, particularly.
Schroders portfolio supervisor Isabella Hervey-Bathurst wrote in a weblog that the disaster may end in a shortfall in gasoline, which can end in coal-powered mills being restarted in some international locations. “Nevertheless,” she stated, “this shouldn’t be taken to imply that the vitality transition has been sidelined: removed from it… This disaster has created an extra impetus to maneuver to a future freed from fossil fuels extra rapidly.”
Meals and agricultural costs soar
The disaster has had a major impression on foodstuffs, particularly wheat. Based on Reuters, Ukraine and Russia account for 29% of worldwide wheat exports, whereas the previous accounts for 13% of worldwide corn exports. With Ukraine’s ports closed and agriculture provides from Russia constrained, there was a scramble to pay money for wheat elsewhere to cowl a possible shortfall.
The state of affairs has sparked a major worth rise in wheat and different commodities, together with corn and sunflower oil. Corporations which have decrease publicity to the disaster are prone to fare higher. Take German pharmaceutical and agrochemical big Bayer [BAYN.DE]. On the shut on 4 April, its share worth had climbed 21.4% up to now month to its highest degree since June 2020. Any investor fears could also be eased by the truth that Russian gross sales reportedly make up simply 2% of complete income.
The rising price of oil has additionally been a boon for fertiliser shares. Farmers depend on fertilisers derived from just a few pure sources: pure gasoline, potash and phosphate. As of 4 April Intrepid Potash [IPI] was up 32.4% up to now month, whereas Nutrien [NTR] was up 15.2% over the identical interval.
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