Equity futures and global stocks tumbled yesterday, while bonds and oil soared as Russian President Vladimir Putin’s decision to order a military attack on Ukraine cast a pall over global markets.
S&P 500 and NASDAQ 100 contracts slid about 2.5 and 3 percent respectively, signaling the latter, tech-heavy gauge might end up in a bear market. European futures shed more than 4.5 percent and an Asia-Pacific equity gauge fell to the lowest since 2020. Shares slumped in Moscow after a trading suspension was lifted.
In Asia trading, shares in Hong Kong, Singapore, Sydney and Wellington lost at least 3 percent, while Taipei, Manila, Mumbai and Seoul fell more than 2 percent. There were also steep losses in Bangkok, Jakarta, Shanghai and Tokyo.
Photo: AP
Crude and European natural gas surged on possible risks to Russian energy exports, with Brent oil scaling US$100 per barrel for the first time since 2014. The flight to safety saw the US 10-year Treasury yield fall below 1.9 percent. Gold reached the highest level since early last year.
“It is hard to find any reasons for the sell-off to reverse now that it appears the tanks are rolling,” Oanda Corp analyst Jeffrey Halley said.
“Stronger sanctions are to come on Russia and energy prices will inevitably head higher in the short term,” he added.
The US dollar and yen rose, while the euro and commodity-linked currencies retreated. The ruble hit a record low versus the greenback in interbank trade and the Bank of Russia said it would conduct foreign-exchange interventions.
The cost of everything from oil to grains to metals rose on worries that raw-material flows would be disrupted by the unfolding crisis. Ukraine is a major grain exporter and sanctions could isolate Russia, a commodity powerhouse.
That backdrop heralds fresh challenges for a global recovery that was already struggling with elevated price pressures and tightening monetary policy.
“Basically, there’s no scenario priced into the markets because it’s impossible to discount fully,” IG Markets Ltd analyst Kyle Rodda said. “This is always the worst set of circumstances. Bad news is one thing. Bad news with practically unknown outcomes is another.”
The escalation by Russia “will spur further risk-off moves into safe-haven assets, considering that the situation will remain volatile with retaliation measures coming from Western powers,” IG Asia Pte strategist Yeap Jun Rong said.
In cryptocurrencies, bitcoin slid to less than US$35,000 amid risk aversion. The second-largest token ether also had heavy losses. That suggests the most speculative areas of markets face a painful period.
Overall, more volatility is likely in the near term, but history suggests that markets such as the S&P 500 would move into positive territory in the next 30 and 90 days after the initial shock, said Mahjabeen Zaman, head of investment specialists at Citigroup in Sydney.
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