Futures tied to the S&P 500, Nasdaq-100 and Dow Jones Industrial Average fell between 2.5% and 3.4%. The S&P 500 moved into correction territory earlier this week, and futures are indicating that the Dow is on track to do so. Nasdaq futures are pointing to the index approaching a bear market. The Cboe Volatility Index rose to its highest level in 15 months.
The Russian attack – sharply condemned by President Biden – adds to the pressure on a global economy that is already reeling from poor supply chains and the highest inflation in a few years, with Europe likely to bear the brunt of the economic impact.
“This is what appears to be unbelievable to most investors, and it is actually happening,” said Moscow-based chief strategist at BCS Global Markets, Slava Smolyaninov. “It is the complete transformation of everything; We’re in a different world right now.”
The pan-continental stokes Europe 600 fell more than 4%. The MOEX benchmark for Russian stocks fell 32%, setting it up for its biggest drop on record. Asian stock indexes also fell sharply, Hong Kong’s Hang Seng index fell more than 3%, and Japan’s Nikkei stock average closed at its lowest level since November 2020.
The Russian ruble weakened to a record low, falling as much as 9% against the dollar and trading at 90 rubles to $1 before recovering modestly. The Russian central bank said it would intervene in the foreign exchange market and ban short selling.
Ukraine’s foreign exchange market suspended its operations as part of martial law measures, according to a statement from its central bank. The country’s stock exchange also said it was suspending activity.
Global benchmark Brent crude oil held above $100 a barrel for the first time since 2014, with the front-month contract rising 8.5% to $105.10. Prices for its US counterpart, West Texas Intermediate, also jumped.
Other commodity markets also rose. Natural-gas futures in Europe rose 40% and benchmark prices for aluminum and nickel, two metals for which Russia is a major producer, hit their highest levels in nearly a decade. As Russia and Ukraine are both major grain producers, wheat and corn futures also hit several-year highs.
“We thought Putin’s strategy was largely around negotiations; it was a consensus among investors. We haven’t had a serious military conflict in Europe for a very long time,” said Gregory Perdon, chief investment officer at Arbuthnot Latham. , so there’s no playbook for it.” “A lot has changed since last night.”
Gold and US Treasury bonds, which both typically rally in times of stress, rose in price. The most actively traded gold futures contract rose 2.9% to nearly $1,965 per troy ounce, its highest level since September 2020.
The yield on the benchmark 10-year US Treasury note fell to 1.877% from 1.976% on Wednesday. Bond yields fall as prices rise. European government bonds also edged up, with the equivalent yield on German bonds falling 0.111%.
The dollar strengthened with the WSJ Dollar Index gaining 0.8%. Currencies considered to be havens, such as the Japanese yen, also appreciated while the cryptocurrency fell, with bitcoin falling 6% to around $35,350.
Florian Ilpo, head of macro at Lombard Odier Investment Managers, said investors are building up their cash buffers due to market tensions. The fund it manages currently holds the most liquidity since the market crash in March 2020.
The invasion resonated in the markets of Eastern Europe and Turkey. The Polish zloty, Hungarian forint and Turkish lira all fell about 3% against the dollar. Polish bank shares declined, with PKO Bank Polski falling 15%. Wizz Air, the airline with its major markets in Eastern Europe, declined 14%.
Shares of other European companies with large operations in Russia also fell. Austria’s Riefsen Bank, which had more than 20% of its workforce in Russia at the end of 2021, declined by more than 18%. UniCredit and Société Générale both fell 11%. French carmaker Renault, which also has a major Russian subsidiary, fell more than 10%.
Defense stocks edged higher, with BAE Systems rising 6%. US-listed Northrop Grumman climbed 3% in premarket trading.
The Russian attack comes at a time when markets were volatile due to changes in the Federal Reserve’s monetary policy.
“The game-changer for me is, what does this mean for the Fed? Ultimately now, interest rate hikes and aggressive tightening are going to be very difficult,” Mr. Perden said.
Market expectations for a 0.5 percentage point increase at the Fed meeting next month, instead of the more standard 0.25 percentage point increase, declined on Thursday. According to data from CME Group, the market pricing showed that the probability has dropped to 17% from 34% a day earlier.
Weekly US jobless claims came in at 232,000, a drop from the previous week and in line with analysts’ expectations amid a tight labor market.
Beyond Meet, Etsy and cryptocurrency exchange Coinbase are scheduled to report earnings after the market close.
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