Global stocks tumble as Ukraine tensions mount

Bloomberg

Stocks fell around the world as geopolitical risks over Ukraine rippled through global markets, adding to concerns about inflation and the prospect of aggressive Federal Reserve interest-rate hikes to tame it.
US futures dropped, with airlines sliding in premarket trading as Ukraine tensions hit travel stocks and companies exposed to Russia and eastern Europe were under pressure. Expensive growth stocks, which stand to suffer the most from higher interest rates, also fell.
Meanwhile, banks were among the biggest declines
in Europe, surrendering their place as the region’s best-
performing sector of 2022 to energy.
European natural gas prices jumped and oil fluctuated, while government bonds surged and haven currencies outperformed.
Tensions over Russia’s military buildup near Ukraine are entering a potentially decisive week as the US warns an invasion may be imminent and President Vladimir Putin accuses America of failing to meet his demands.
Russia has repeatedly denied it plans to invade its neighbour, and a diplomatic push to try
to resolve the situation is continuing, with German Chancellor Olaf Scholz travelling to Kyiv, a day before heading to Moscow.
A deterioration in Ukraine could stoke concerns about price pressures if supplies of Russian energy and Ukrainian grain are disrupted. Higher energy prices have already boosted inflation across Europe, sparking a cost-of-living crisis that’s prompted several governments to step in to help cushion the blow of rising energy bills for consumers.
European natural gas prices jumped with storage facilities running low and concern over any disruption to supply from Russia, the continent’s top source. Oil fluctuated after an earlier rally put $100 a barrel in sight.
Russia is a major producer of metals such as aluminum and nickel; it accounts for about 40% of palladium, used in catalytic converters.
Russia and Ukraine also account for nearly a third of wheat and barley exports, and wheat continued to advance on Monday. “The impact on inflation will go beyond oil and gas,” said Wai Ho Leong, strategist at Modular Asset Management in Singapore. “For the rest of the world, it is potentially a massive food shock.”
Among individual stock moves in Europe, Clariant AG tumbled the most in 19 years after the company postponed results amid an accounting investigation. Hungary’s Wizz Air Holdings Plc led a decline in airlines as carriers took further steps to avoid Ukraine.
One question for investors is whether stocks forged lows for the year near the end of January or face more pain on Russia-Ukraine tension.
Lori Calvasina, head of US equity strategy at RBC Capital Markets LLC, said the January lows have a good chance of holding, while Michael Wilson, Morgan Stanley’s chief US equity strategist, said a potential invasion could push economies into recession.
“There’s no past conflict that provides a good template for how low stocks could trade if an invasion occurs,” Calvasina wrote in a note.
Futures on the S&P 500 fell 0.8% in New York. Futures on the Nasdaq 100 fell 1.1%. Futures on the Dow Jones Industrial Average fell 0.7%. The Stoxx Europe 600 fell 2.7%. The MSCI World index fell 1.5%.
The Bloomberg Dollar Spot Index rose 0.2%. The euro fell 0.4% to $1.1307. The British pound fell 0.4% to $1.3511. The Japanese yen rose 0.2% to 115.18 per dollar.
The yield on 10-year Treasuries declined two basis points to 1.92%. Germany’s 10-year yield declined nine basis points to 0.21%. Britain’s 10-year yield declined six basis points to 1.49%.
West Texas Intermediate crude fell 0.3% to $92.86 a barrel. Gold futures rose 0.8% to $1,857.70 an ounce.