FTSE 100 – How are the markets performing amid the conflict in Ukraine? - 20/05/22

There is no denying we’re all facing difficult economic conditions, with basic living costs currently spiralling out of control. Here at CompareYields we have been keeping a close eye on how the conflict might affect the FTSE 100 in a bid to establish any future trends. What we have found so far is stability in any market appears to be unlikely at this stage, with the conflict in Ukraine only snowballing as we approach the end of the first quarter.

Energy in particular is becoming a growing concern, especially here in the UK with much of the country’s infrastructure based around its consumption. Shell PLC has outlined how it expects a further US$400m write-down in Russian downstream assets, on top of the US$3bn it had previously announced in response to the Ukrainian conflict.

This move includes its ventures with energy company Gazprom, the Sakhalin 2 liquefied natural gas plant and the Nord Stream 2 pipeline project. "It is expected that these decisions will impact the carrying value of the related assets and lead to recognition of impairments in 2022," Shell said. BP also has indicated it will cut all remaining connections to Russian producers, with a three-decade partnership with Rosneft coming to a close.

Oil prices too have seen new records across the board, as Brent Crude’s current behaviour seems more akin to that of crypto, as prices shoot up and down by almost 20% in the space of 24 hours.

"These markets are kind of insane right now: More than just a gap filled for crude – it’s the kind of market that will cut you up in both directions,” said Neil Wilson at markets.com. "Crude remains super volatile and super sensitive to Russia-Ukraine headlines.” he added.

At the start of the week (March 7th) the average cost of a litre of petrol in the UK was 159.6p, while diesel surged to a new record of 167.4p a litre. Global producers are looking to ramp up production to help backstop the demand, as much of the world cuts off their supply from Russia. Chris Beauchamp, chief market analyst at online trading group IG, said that after Wednesday’s big rally bullish sentiment still remains fragile.

“Some of the ground gained yesterday has been given back, with most of the FTSE 100 tending to the downside,” he said. “It looks like yesterday’s bounce might have been a bit of a one-hit wonder, a product of short covering and thinner liquidity. Nothing over the past 24 hours really suggests a major change in tone, and for now the downside case continues to prevail, bolstered by continued fears about inflation and the shift towards hawkishness in central bank thinking.”

Compared to the challenges faced by the FTSE 100, the property sector continues to go from strength to strength. Along with prices growing across the UK, investments in buy-to-let offer a much lower level of volatility in the current climate. By building a solid portfolio, you can reduce much of your financial exposure, whilst benefit from the knowledge of owning a tangible asset.

North West cites such as Liverpool and Manchester have experienced some impressive property price growth, representing about 15% per year, with rental returns approaching around 10%. North West developers tend to offer a completely hands-free model, perfect for anyone looking for a painless monthly income. With demand still outstripping supply, and many markets proving difficult to predict in 2022, now more than ever is the time to invest in the UK property market.

Improve Your Portfolio

Join CompareYields today and discover exclusive investment opportunities in the UK property market.