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Equities tumble and U.S. dollar rises as Russia/ Ukraine fears escalate

Economy Feb 23, 2022 05:07PM ET
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2/2 © Reuters. FILE PHOTO: Passersby wearing protective face masks walk past a stock quotation board, amid the coronavirus disease (COVID-19) pandemic, in Tokyo, Japan January 25, 2022. REUTERS/Issei Kato 2/2

By Sinéad Carew

NEW YORK (Reuters) -Investors around the world lost their appetite for risk on Wednesday, with stocks selling off and the U.S. 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 U.S. 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 U.S. official said on Wednesday that Russia is as ready as it can be to launch what could be a full-scale invasion, with 80 percent of troops assembled around Ukraine in attack positions.

After rising as much as 0.7% earlier on Wednesday 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%, registering its lowest level since April 2021. After falling as much as 1% and rising almost 2% during the day, Brent crude settled unchanged from Tuesday's close at $96.84, while West Texas Intermediate settled up 0.21% at $92.10 per barrel after earlier falling as much as 1.9% and rising 1.7% all in the same day. [O/R]

Investors have also been grappling with the prospects of a U.S. 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 But these worries have "been somewhat superseded by events in eastern Europe and in Russia," said Rhys Williams, chief strategist at Spouting Rock Asset Management.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%, 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%, to end at 4,225.5 and the Nasdaq Composite dropped 344.03 points, or 2.57%, 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%, up from 1.948% late on Tuesday. The 30-year bond last fell 30/32 in price to yield 2.2963% up from 2.253% while the 2-year note last fell 1/32 in price to yield 1.6016%, up from 1.587%.

Trading was also choppy in currencies with the dollar index last up 0.127% and the euro down 0.18% at $1.1305.

The U.S. dollar strengthened sharply and was last up 3.2% against the Russian rouble, more than reversing its losses on Tuesday against the Russian currency.

The New Zealand dollar NZD= 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% versus the greenback at $0.678.

Palladium rose 4.5% to a near six-month peak driven by fears of a hit to supply from top producer Russia. Gold added 0.6% to trade at $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.

Equities tumble and U.S. dollar rises as Russia/ Ukraine fears escalate
 

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Comments (15)
John Laurens
John Laurens Feb 23, 2022 8:31PM ET
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The big question is: how dependent is US business on Ukranian or Russian industry is. Answer: 0 ~ Buy these dips! Conservatives will be back in power in the US soon, and will have a Republican President in '24. You won't ever see these bargains again.
Kyaw Kyaw
Kyaw Kyaw Feb 23, 2022 7:47PM ET
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Greg Pomering
Greg Pomering Feb 23, 2022 5:58PM ET
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whole market is bogus sec needs to act on all the crime going on in these markets! nobody's gonna waste money when system is broken
Marco cuevas
Marco cuevas Feb 23, 2022 10:28AM ET
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Tried to wsrn you guys....ITS A TRAP! big daddy hedge fund manager needs to pay his yacht paymrnt.
Rob Fordham
Rob Fordham Feb 23, 2022 7:45AM ET
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Most of these comments seem to fall into two catagories 1) sky is falling 2) conspiracy theory of some sort against wall street the government or both. I used to go to these comments for cogent insights. Now it seems they have all gone to absolutes and conspiracy sad
ottin nerner
ottin nerner Feb 23, 2022 7:45AM ET
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Man, It is entertaining, don't burst the bubble....
Marco cuevas
Marco cuevas Feb 23, 2022 6:04AM ET
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wallstreet wolves ready to punce on the puny investor...you have been warned...ITS A TRAP!
Jan Rokyta
Jan Rokyta Feb 23, 2022 5:31AM ET
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In the end, it's Biden and Putin squeezing all their crooks into submission. I hope!
Dale Wyffels
Dale Wyffels Feb 23, 2022 1:56AM ET
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what is anyone confident in?
Johnny Crash
Johnny Crash Feb 23, 2022 1:08AM ET
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Has anyone noticed how the only leader that is really building back better is Putin? He took control over Kazakhstan, now Ukraine. Back to the USSR
Rosh Jardine
RoshJardine Feb 23, 2022 1:08AM ET
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Stay "put in" Johnny haha how's the party? You must have had a lot of parties these days
Tom Sc
Tom Sc Feb 23, 2022 1:08AM ET
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wow, what a daft comment
Tre Hsi
Tre Hsi Feb 23, 2022 1:08AM ET
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"....the only leader that is really building back better is Putin"  -- he maybe building back, but is it better?  let's not forget USSR was basically bankrupt by the late 80's
sandeep varma
sandeep varma Feb 23, 2022 12:45AM ET
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Market want something new apart from Russia which I think is now digested ..
 
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