Stocks tumble, Brent climbs to $100 on Russian assault: Markets end
Stock futures and U.S. stocks fell on Thursday as bonds surged and oil soared as Russian President Vladimir Putin’s decision to order a military attack on Ukraine cast a veil in world markets.
The S&P 500 and Nasdaq 100 contracts slid about 2%, signaling that the latter, the tech heavy gauge is on track for a bear market. European futures fell around 3.5% and the Asia-Pacific stock gauge fell to the lowest since 2020. Trading in the ruble, stocks and futures on the Moscow Exchange was halted.
Russian forces attacked towns across Ukraine after Putin ordered an operation to demilitarize the country, prompting Ukraine’s foreign minister to warn of a “full-scale invasion”. Ukraine has imposed martial law.
Putin said that Russia did not plan to “occupy” its neighbor, but that Russia had to “defend itself from those who held Ukraine hostage” – the United States and its allies who had crossed the “line red” of Russia with the expansion of the NATO alliance.
Crude surged on potential risks to Russian energy exports, with Brent hitting $100 a barrel. The flight to safer investments saw the 10-year US Treasury yield fall below 1.90%. Gold hit its highest level since early 2021. The dollar and yen surged, while the euro and commodity-linked currencies retreated.
Western powers are ready to tighten sanctions to punish Russian aggression. President Joe Biden has announced he will impose “further consequences” on Russia and meet with other G-7 leaders.
The cost of everything from oil to grain to metals has surged on fears that commodity flows will be disrupted by the Ukraine crisis. This heralds new challenges for a global recovery already struggling with elevated price pressures and tighter monetary policy.
“Basically, there is no built-in storyline in the markets because it’s impossible to fully discount,” said Kyle Rodda, analyst at IG Markets Ltd. “It’s always the worst set of circumstances. Bad news is one thing. Bad news with virtually unknown results is another.
In cryptocurrencies, Bitcoin slipped to around $35,000 amid risk aversion. The second Ether token also suffered heavy losses.
Markets have reduced their bets on the number of rate hikes by the Fed in 2022, with around six 25 basis point hikes expected. Investors remain worried that Fed tightening could stifle expansion in the world’s largest economy.
Russia’s escalation “will spur further risk-hedging measures towards safe-haven assets, as the situation will remain unstable with retaliatory measures from Western powers,” said Jun Rong Yeap, strategist at IG. Asia Pte, adding “upside risks”. to inflation has just risen.
Here are some events to watch for this week:
- Bank of Korea policy decision on Thursday
- EIA Crude Oil Inventory Report Thursday
- Fed officials Loretta Mester and Raphael Bostic speak on Thursday
- US new home sales, GDP, first jobless claims Thursday
- US Consumer Income, US Durable Goods, PCE Deflator, University of Michigan Consumer Sentiment Friday
Some of the major movements in the markets:
- S&P 500 futures fell 2% at 1:48 p.m. in Tokyo. The S&P 500 fell 1.8%
- Nasdaq 100 futures fell 2.4%. The Nasdaq 100 fell 2.6%
- Japan’s Topix index fell 1.4%
- Australia’s S&P/ASX 200 index fell 2.9%
- South Korea’s Kospi index drops 2.5%
- Hong Kong’s Hang Seng index fell 3.1%
- China’s Shanghai Composite index lost 0.9%
- Euro Stoxx 50 futures fell 3.5%
- The Japanese yen was at 114.66 to the dollar, up 0.3%
- The offshore yuan traded at 6.3156 to the dollar
- The Bloomberg Dollar Spot Index rose 0.4%
- The euro was at $1.1230, down 0.7%
- The yield on 10-year Treasury bills fell 11 basis points to 1.88%
- The Australian 10-year bond yield was 2.17%, down 10 basis points
- West Texas Intermediate crude rose 4.5% to $96.24 a barrel
- Gold was at $1,937.62 an ounce, up 1.5%
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