GLOBAL stocks hit three-week lows and oil rose on Monday as worries increased that Russia will invade Ukraine.
Russian forces killed a group of five saboteurs who breached the country’s southwest border from Ukraine on Monday, news agencies quoted the military as saying, an accusation that Kyiv dismissed as the latest in a series of fakes.
Kyiv and the West fear that a border incident near eastern Ukraine could be used as a pretext for Moscow to attack its neighbour. Russia denies such plans. read more
Markets are on high alert for any escalation in the crisis.
MSCI’s world equity index fell 0.4% to 700.11 with Monday’s public holiday in the US which will keep Wall Street closed, thinning trade and adding to the volatility.
S&P 500 stock futures fell 0.66% while Nasdaq futures dropped 1.2%.
European stocks dropped 1.65% to their lowest in more than four months. British stocks fell 0.5%. Shares in companies exposed to Russia and Ukraine fell heavily.
US stock futures and European stocks lost earlier gains made on news that US President Joe Biden and Russian President Vladimir Putin had agreed in principle to hold a summit on the Ukraine crisis.
The Kremlin said there were no concrete plans in place for a summit though a call or meeting could be set up at any time.
British foreign minister Liz Truss said she was stepping up preparations with allies for a worst-case scenario, adding that a Russian invasion of Ukraine was highly likely.
In a reminder of the high stakes, Reuters reported Biden had prepared a package of sanctions that includes barring US financial institutions from processing transactions for major Russian banks.
The rouble slid nearly 3% against the greenback and Russian shares slumped 9% their lowest in 14 months.
The US dollar index dipped 0.1% to 95.668, well short of a 1½-year high of 97.441 hit last month.
The euro was little changed at US$1.1327 while yields on German 10-year government bonds, seen as Europe’s safest asset, hit two-week lows at 0.185%.
A preliminary Purchasing Managers’ Index survey showed the euro zone economy rebounded sharply this month as an easing of coronavirus restrictions gave a boost to the dominant service industry.
“A Russian invasion of Ukraine would make the job of central banks across Europe much harder,” said Matteo Cominetta, senior economist at Barings Investment Institute. “Investors should position for even higher uncertainty and probability of policy mistakes.”
Markets are also expecting aggressive policy tightening by the US Federal Reserve as inflation runs rampant. The Fed’s favoured measure of core inflation is due out later this week and is forecast to show an annual rise of 5.1% – the fastest pace since the early 1980s.
In oil markets, Brent crude rose by US$1 to US$94.41 on the Ukraine crisis while US crude also gained $1 to US$91.98.
Gold has benefited from its status as one of the oldest of safe harbours, climbing to nine-month highs of US$1,908/ounce before dropping back to US$1,893/ounce. – Feb 22, 2022
