NEW YORK Feb 24 ― Investors around the world lost their appetite for risk yesterday, with stocks selling off and the US dollar gaining some ground as Ukraine declared a state of emergency amid intensifying fears of a full-scale Russian invasion.
Trading in many asset classes has been volatile since Russian President Vladimir Putin's dispatch of troops earlier this week into parts of Ukraine. This triggered sanctions from Western countries and threats of more if Moscow advances further.
Oil futures, which were whipsawed during the day, settled well below their session highs and US Treasury yields, while staying above Tuesday's close, were also volatile.
Ukraine declared a state of emergency and told its citizens to flee Russia, while Moscow began evacuating its Kyiv embassy. The Russian-backed separatist leader of a Ukrainian breakaway region said Ukrainian government forces should withdraw from territory that his self-proclaimed state has claimed and take their weapons with them.
A senior US official said yesterday that Russia is as ready as it can be to launch what could be a full-scale invasion, with 80 per cent of troops assembled around Ukraine in attack positions.
After rising as much as 0.7 per cent earlier yesterday the MSCI World Index, a leading gauge of equity markets globally, reversed course in morning trading and deepened losses as the day wore on to finish off 1.2 per cent, registering its lowest level since April 2021.
After falling as much as 1 per cent and rising almost 2 per cent during the day, Brent crude settled unchanged from Tuesday's close at US$96.84 (RM405.42), while West Texas Intermediate settled up 0.21 per cent at US$92.10 per barrel after earlier falling as much as 1.9 per cent and rising 1.7 per cent all in the same day.
Investors have also been grappling with the prospects of a US Federal Reserve policy tightening aimed at combating surging inflation. But these worries have “been somewhat superseded by events in eastern Europe and in Russia,” said Rhys Williams, chief strategist at Spouting Rock Asset Management.
“So in the very short term, markets will go up or down based on whether (Putin) marches to Kyiv,” said Williams, adding that investors had appeared to accept Russia's move into the Donetsk and Luhansk regions in Ukraine.
But if Putin “goes to Kyiv and there is a regime change and potentially a guerrilla war for the next two generations, that's a more difficult scenario and there is frankly only one person who can decide this.”
The Dow Jones Industrial Average fell 464.85 points, or 1.38 per cent, to 33,131.76, barely above the 33,119.685 level that would have confirmed a correction.
The S&P 500 lost 79.26 points, or 1.84 per cent, to end at 4,225.5 and the Nasdaq Composite dropped 344.03 points, or 2.57 per cent, to 13,037.49.
Michael James, managing director of equity trading at Wedbush Securities in Los Angeles, said there was currently “very little positive validation for buying anything.”
“If anything, President Putin is digging his heels in despite the increased sanctions,” said James. “That's really adding to elevated nervousness about further aggressive actions and what that will mean for commodities and inflation overall as well as potentially lower market prices as overall equity sentiment continues to worsen.”
Treasury yields were higher as investors monitored Russia-Ukraine events and remained concerned about inflation and a potential Federal Reserve policy mistake.
Benchmark 10-year notes last fell 13/32 in price to yield 1.9912 per cent, up from 1.948 per cent late on Tuesday. The 30-year bond last fell 30/32 in price to yield 2.2963 per cent up from 2.253 per cent while the 2-year note last fell 1/32 in price to yield 1.6016 per cent, up from 1.587 per cent.
Trading was also choppy in currencies with the dollar index last up 0.127 per cent and the euro down 0.18 per cent at US$1.1305.
The US dollar strengthened sharply and was last up 3.2 per cent against the Russian rouble, more than reversing its losses on Tuesday against the Russian currency.
The New Zealand dollar jumped after the Reserve Bank of New Zealand raised interest rates and said more tightening could be necessary. The kiwi last was up 0.71 per cent versus the greenback at US$0.678.
Palladium rose 4.5 per cent to a near six-month peak driven by fears of a hit to supply from top producer Russia. Gold added 0.6 per cent to trade at US$1,908.62 an ounce.
Russia is the world's third-largest producer of gold, while the country's Nornickel is also a major producer of palladium and platinum, both of which are used in catalytic converters to clean car exhaust fumes. ― Reuters
