European markets watchdog on red alert for Ukraine war contagion
Reuters
Published Sep 01, 2022 10:08
By Huw Jones
LONDON (Reuters) - The European Union's markets watchdog said on Thursday it was on red alert for contagion after inflation stoked by Russia's invasion of Ukraine has threatened markets' ability to function in an orderly way.
The European Securities and Markets Authority (ESMA) in its latest risk monitor report gave an overall red risk rating for markets, with only credit risks and environmental risks flashing amber, and none green.
Contagion and operational risks, such as liquidity, were very high, it said.
Against a backdrop of already increasing inflation, the Ukraine war has profoundly impacted financial markets, leading to rapid price rises and volatility, especially in commodities.
"These present liquidity risks for exposed counterparties and show the continued importance of close monitoring to ensure orderly markets, a core objective for ESMA," Verena Ross, the watchdog's chair, said in a statement.
As European Union states revert to more polluting sources of energy, such as coal to cut dependence on Russian energy, EU investment funds, which tout their environment, social and governance (ESG) credentials saw net outflows for the first time in two years in March.
But the fundamental shift into ESG investments continues overall, with ESG assets averaging 27% of the total in the second quarter of 2022, compared with under 10% in the first half of 2020.
Russia's invasion of Ukraine raised questions over the compatibility of sustainable investment practices with the financing of non-democratic regimes or weak democracies, ESMA added.
"The Russian invasion highlights the importance of the 'S' (social) pillar in ESG investing and its clear link to 'E' pillar," ESMA said.
During the first half of 2022, there was also big drop in crypto-asset prices and liquidity, meaning investors with big positions have limited options to exit, ESMA said.
Get The App
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.