US stocks dropped and government bond prices rose on Friday, as investors sought out havens amid the escalating war between Russia and Ukraine.
On Wall Street, the S&P 500 share index slipped 0.8 per cent and the technology-focused Nasdaq Composite fell 1.7 per cent in choppy trading.
Instead, investors sought out the safety of US government bonds, gold and the dollar.
The yield on the 10-year US Treasury note, which underpins borrowing costs worldwide, fell 0.1 percentage points to 1.74 per cent. Yields move inversely to prices. The dollar index, which measures the US currency against six others, rose 0.7 per cent. Spot gold rose 1.7 per cent.
“The market is struggling to very quickly process the new information that is constantly coming out about the escalating conflict,” said Georgina Taylor, multi-asset fund manager at Invesco.
Equity market declines were even sharper in Europe, with the regional Stoxx 600 share index closing 3.6 per cent lower. Germany’s Xetra Dax fell 4.4 per cent and London’s FTSE 100 declined 3.5 per cent.
The moves came after Russian forces seized a Ukrainian nuclear plant. The assault on the Zaporizhzhia facility prompted Joe Biden, US president, to urge an immediate ceasefire on the site of Europe’s largest nuclear facility in south-eastern Ukraine. A fire was extinguished at the site early on Friday.
The euro fell 1.2 per cent against the dollar to $1.093, dipping below $1.10 for the first time since May 2020, as traders rushed to reduce their exposure to a region that may feel the most impact from Russia’s invasion of Ukraine and associated western sanctions.
“Investors are looking to distance themselves from the conflict in any way they can,” said Baylee Wakefield, multi-asset portfolio manager at Aviva Investors. “And that means reducing exposure to Europe.
“It makes sense for asset managers to reduce risk ahead of the weekend,” she added. “The situation is changing all the time and short-term news flow can really impact markets at the moment.”
Oil prices soared on Friday following calls by politicians on both sides of the aisle for a US embargo on Russian oil earlier this week.
Brent crude, the international oil benchmark, settled nearly 7 per cent higher to $118.11 on Friday as western sanctions outweighed hopes for a nuclear deal between Washington and Tehran. The oil benchmark hit its highest level since 2012 the previous day.
Futures linked to TTF, Europe’s wholesale natural gas price, surged as much as 41 per cent to hit €208 per megawatt hour.
“The risk of a disruption to the suddenly increasing amounts of gas transiting through Ukraine is also now significant given the escalating military action taking place across the region,” analysts at S&P Global Markets said.
As the impact of the war reverberates through markets, investors are debating whether the US and European central banks will reverse plans to raise borrowing costs from pandemic-era record lows.
Before Russia invaded Ukraine, the US Federal Reserve had been expected to increase interest rates more than seven times this year. Derivatives markets are now pricing fewer than six quarter-point rises by December, even though non-farm payrolls data released on Friday showed that US employers added a much larger than expected 678,000 jobs in February.
In Asia-Pacific, Hong Kong’s Hang Seng share index closed 2.5 per cent lower and Tokyo’s Nikkei 225 lost 2.2 per cent.
Additional reporting by Neil Hume
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2022-03-04 21:55:29Z
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