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US Stocks Fall As Traders Assess Russia-Ukraine Tensions

Financial markets have swung sharply over the past week as developments in Ukraine. Stocks on Wall Street slid on Friday and were on course ...

Financial markets have swung sharply over the past week as developments in Ukraine.
Stocks on Wall Street slid on Friday and were on course for their second-consecutive weekly loss as tensions between Russia and Ukraine intensified at the end of a volatile five trading days.

The S&P 500 had fallen 0.5 per cent by mid-afternoon on Friday as traders removed some of their bets ahead of a long weekend, girded for news that could move markets. The technology-heavy Nasdaq Composite had declined 0.8 per cent. The Cboe’s Vix volatility index, which measures expected swings on the S&P 500 and is known as Wall Street’s “fear gauge”, nearly hit 30 — an indication of market stress.

S&P 500 on course for second-consecutive weekly loss while Wall Street’s ‘fear gauge’ rises

Moscow-backed separatists in eastern Ukraine announced plans for a “mass evacuation” of civilians to Russia. Also on Friday, Russia announced plans for nuclear drills to test ballistic and cruise missiles, while saying it would pursue talks with western powers after Antony Blinken, US secretary of state, invited his Russian counterpart Sergei Lavrov to meet in Europe next week.

Financial markets have swung sharply over the past week as developments in Ukraine added to fears of potential sanctions against Russia, exacerbating market jitters about inflation and central banks raising interest rates. The S&P is down more than 8 per cent for the year, after hitting a record high in January, while the Nasdaq has lost more than 12 per cent.

“If there were an invasion then we know for sure the oil price will go higher, that’s inflationary, and that will make the Fed a bit more aggressive,” said Marija Veitmane, senior strategist at State Street. “So that’s the transmission mechanism between these geopolitical risks around Russia and global markets.”

Russia is one of the world’s largest oil producers and a leading commodities exporter. In the US, inflation has surged to a 40-year high, and markets are predicting that the Federal Reserve will lift interest rates by six quarter-point rises this year.

On Friday, Brent crude, the international oil benchmark, gained 0.4 per cent to $93.31 a barrel after touching a seven-year high this week. Russia’s Moex share index fell 3.4 per cent, following a 3.7 per cent drop in the previous session. The rouble declined more than 1 per cent against the dollar. Europe’s regional Stoxx 600 share index fell 0.8 per cent, Germany’s Xetra Dax dropped 1.5 per cent and the UK’s FTSE 100 lost 0.3 per cent.

Lale Akoner, senior market strategist at BNY Mellon Investment Management, said stock markets were likely to remain under pressure until geopolitical risks receded. “The market has been pricing in the economic implications if sanctions were implemented on Russia,” she said. If an invasion did not occur, she added, “then oil prices fall, commodities prices and precious metals go down and equities will go higher as risk sentiment improves”.

In Asia, Hong Kong’s Hang Seng index dropped 1.9 per cent as Chinese technology stocks fell sharply. The moves came after the National Development and Reform Commission, Beijing’s top state planning agency, urged online food delivery platforms to lower the fees they charge restaurants.

Shares in food platform Meituan dropped almost 15 per cent. Hong Kong shares of internet holding company Alibaba, which owns food delivery platform, fell 2.9 per cent.

In government bond markets, the yield on the benchmark 10-year US Treasury note, which moves inversely to its price and underpins borrowing costs worldwide, fell 0.04 percentage points to 1.93 per cent. Germany’s equivalent Bund yield dipped 0.04 percentage points to 0.19 per cent.

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