After Russia invaded Ukraine, global stocks fell and oil prices exceeded $100

Oil prices topped $100 a barrel for the first time since 2014, global stock markets fell and the ruble hit a record low on Thursday, after Russia invaded Ukraine.

According to Reuters, global markets showed all the expected reactions, as European stock markets fell nearly 4% (.FTEU3) in a frenzied sell-off, while the prices of top-rated government bonds, the dollar, the Swiss franc, the Japanese yen and gold rose as traders sought safety .

Commenting on Russia's invasion of Ukraine, Putin said he authorized what he called a special military operation even though Western governments and Ukraine described it as a full-scale invasion. While US President Joe Biden said that "severe sanctions" would be imposed on Russia after the attacks, European leaders pledged to freeze assets and close Russian banks out of their financial markets.

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The Russian and Ukrainian markets were in free fall. The ruble weakened nearly 7% to 86.98 in an unprecedented fall against the dollar, and there was a record 30% drop in the Moscow Stock Exchange when it opened after an initial suspension, while Ukraine was forced to suspend trading in its currency as its bonds collapsed violently.

“No one expected this and predicting Putin's next move will be the main focus in the coming days,” said Hans Petersen, global head of asset allocation at SEB Investment Management.

“But this is happening at a very strong stage of the business cycle,” he added, noting that now higher energy and commodity prices are also critical.

The stock's trajectory started with a 2.6% dive for All-Asia Indices (.MIAP00000PUS). Then the European Stoxx 600 Index (.STOXX) fell 3.9% - hitting its lowest level since May 2021 and more than 10% away from its record high in January.

Germany's DAX (.GDAXI) fell 4.7%, bearing the brunt of the selling due to heavy dependence on Russian energy supplies and the amounts its companies sell to Russia.

The rise in oil prices helped limit losses in the commodity-heavy FTSE 100 (.FTSE) index in the UK, although it still fell 2.3% and futures markets pointed to similar falls on Wall Street later.

S&P futures fell more than 2%, and Nasdaq futures fell 2.9% in pre-market trading, which if reversed after the market opens, will confirm that the technology-focused index has descended into a so-called "bear" market.

“In the past, when you've had geopolitical turmoil, you tend to have very volatile periods in the markets and then normalize, but it's hard to assess when we're going to get that in this crisis,” said Justin Onwekwosi, LGIM Portfolio Manager.

conflict cost

In the major currency markets, the dollar rose 0.5% against a basket of other major currencies. Almost every asset class has seen a sharp increase in volatility amid the deepening crisis. The Cboe Volatility Index, known as a Wall Street fear gauge, has risen more than 55% over the past nine days. (.VIX)

Fears that Russia is now putting pressure on global energy markets has sent Brent crude futures up more than 8% above $100 a barrel for the first time since September 2014. Nearly 40% of the EU's natural gas and 26% of its crude comes from Russia .

With major crop producers in both Ukraine and Russia, wheat and corn prices are up more than 5%, while gold has jumped more than 1.7% to its highest since early January 2021.

This dive in search of safety also saw yields of German AAA-rated government bonds fall by 10 basis points to 1.119%, the lowest in three weeks. . The benchmark 10-year yield in the US fell sharply as well, falling to 1.85% from its US close of 1.977%.

Investors are also grappling with the possibility of an imminent policy tightening by the US Federal Reserve aimed at combating rising inflation. The question now is whether the conflict will give central bankers a reason to delay those moves or whether the additional rise in energy prices can motivate them.

While expectations for a sharp 50 basis point hike at the Fed's March meeting have cooled, Fed fund futures continue to point to at least six rate hikes this year.

“Markets are now pricing more appropriately at the risk of something horrific,” said Rob Carnell, head of Asia Pacific research at ING. This, combined with the uncertainty, is a horrible environment to live in. Nobody wants to take risks when it's floating.”