Most equity indices all over the world took a nosedive last Thursday as Russian military troops launched a full-fledged attack on Ukraine. However, several countries such as the U.S., the U.K, and those part of the European Union targeted Russia with financial and economic sanctions.
Despite the sell-off on Thursday, indices such as the S&P 500 and NASDAQ were rangebound in the week ended on February 25, 2022. Let’s see what investors should expect from the equity markets in the near term.
Oil prices touch seven-year highs
The U.S. slapped sanctions on the enterprise that’s building Russia’s Nord Stream 2 gas pipeline worth $11 billion. Other Western leaders are also using the pipeline as leverage against Russia as oil exports account for 30% of the country’s economy. However, Russia also supplies more than a third of the natural gas for the EU and it could easily retaliate by switching off these fuel exports.
While a majority of Western corporations don’t have operations in Russia or Ukraine the large multinationals do have a presence there. For example, oil heavyweights such as BP, Shell and Exxon have significant investments in Russia that can be threatened by the sanctions on the country’s energy market.
The U.S. and global crude benchmarks surged past $100 a barrel on Thursday after it was disclosed Russia mounted a full-fledged attack on Ukraine. At the time of writing, Brent crude was trading at $99, raising the possibility for prices to move higher in the upcoming months.
According to a MarketWatch report Louise Dickson, senior oil market analyst at Rystad Energy explained, “Oil prices are soaring with no end in sight [on] the news of Russia’s full-scale military incursion of Ukraine, immediately putting at risk up to 1 million [barrels per day] of Russian crude oil exports transiting through Ukraine and the Black Sea.”
According to Dickson, oil prices could touch $130 by June in case the conflict disrupts Russian crude flows and it could move higher if additional disruptions materialize.
After the U.S. and Saudi Arabia, Russia is the third-largest oil producer globally. Its daily production of petroleum and other liquids is estimated at 10.5 barrels a day, accounting for 11% of the global supply.
Berkshire Hathaway reports stellar results
Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) announced its Q4 results on Friday and its operating earnings surged by 45% year over year to $7.285 billion. In 2021, operating earnings grew by 25% to $27.455 billion. The company pumped in $6.9 billion to repurchase shares in Q4 and spent $27 billion in stock buybacks in 2021. Berkshire still ended 2021 with a cash balance of $146.72 billion.
In Berkshire’s annual shareholder letter, Warren Buffett explained he did not find any enterprise that is exciting enough in terms of a buyout or acquisition. So, the company will continue to increase shareholder wealth in terms of buybacks right now.
Berkshire’s earnings from its railroad, utilities, and energy business surged by 12.3% to $2.241 billion while its insurance-underwriting business earned $372 million in Q4, compared to a loss of $299 million in the year-ago period. Earnings for 2021 more than doubled to $89.79 billion.
While the S&P 500 Index is down more than 8% year-to-date, Berkshire shares have gained 5.5% in 2022.
Etsy stock gains post Q4 results
Shares of e-commerce company Etsy (NASDAQ: ETSY) surged by more than 16% on Friday after it announced Q4 results. It reported sales of $717.14 million in Q4 with adjusted earnings per share of $1.11. Comparatively, Wall Street forecast sales of $685.5 million and earnings of $0.79 per share in the December quarter.
Driven by a strong holiday season its gross merchandise sales or GMS which is the total dollar value of transactions executed on Etsy’s platform rose by 16.5% to $4.2 billion in Q4. The number of active sellers on Etsy rose by 72.3% to 7.5 million while the active buyer count was up 17.6% at 96.3 million in Q4.
The company confirmed the GMS per active buyer in 2021 grew by 16% to $136 while habitual buyers or those who make more than six purchases a year spend $200, an increase of 26%.
Related: How to Discuss Russia/Ukraine Conflict with Clients