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Stocks drop, oil jumps above $100 as Russia invades Ukraine

Stocks drop, oil jumps above $100 as Russia invades Ukraine

A trader works at the Frankfurt Stock Exchange in Frankfurt, Germany, February 22, 2022. REUTERS/Tim Reichert

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  • Oil breaches $100 as Russia invades Ukraine
  • European shares fell 2.75%, the ruble hit a record low
  • MSCI Asia excluding Japan fell more than 3%, the lowest since November 2020
  • Treasuries, bonds, rising dollar
  • Gold is the highest since January 2021

LONDON (Reuters) – Oil prices topped $100 a barrel for the first time since 2014, stock markets tumbled and the ruble hit a record low on Thursday after Russian President Vladimir Putin launched an invasion of Ukraine. Read more

The markets offered all the expected reactions. Major European stock markets opened 2.5%-4% lower, benchmark government bonds, the dollar, the Swiss franc, the Japanese yen and gold all edged up in a move to safety.

Putin said he authorized what he called a special military operation and the Ukrainian government accused Moscow of launching a large-scale invasion. Read more

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US President Joe Biden said the United States and its allies would impose “severe sanctions” on Russia after the attacks. European leaders have said they will freeze assets and remove Russian banks from their financial markets. Read more

The Russian and Ukrainian markets were in free fall.

The ruble weakened nearly 7% to an unprecedented 86.98 per dollar and there were 10% plus falls on the Moscow Stock Exchange when it opened after an initial comment. Then the Russian Central Bank ordered a ban on short selling and over-the-counter markets until further notice.

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The defeat of stocks began with a 2.6% decline for the pan-Asian indices (.MIAP00000PUS.). European STOXX 600 Index (.stoxx) It then fell 2.75% – hitting its lowest level since May 2021 and 10% below its record high in January.

German DAX Index (.GDAXI) And it fell 3.7 percent to bear the brunt of the sale due to the heavy dependence on Russian energy supplies and the amounts sold by its companies to Russia. Rise in oil prices helped limit losses in the UK’s heavy FTSE 100 commodity index (.FTSE)although it is still down 2.3% and futures markets pointed to similar declines on Wall Street later.

S&P 500 e-minis are down 2%, Nasdaq futures are down 2.8%, which if materialized, will confirm that the technology-focused index is in 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’ll get that,” said Justin Onwekwosi, LGIM Portfolio Manager.

The dollar index in the currency markets rose 0.5%. The assets have seen a sharp increase in volatility during the deepening crisis, with the Cboe Volatility Index, known as Wall Street’s fear gauge, up more than 55% over the past nine days. (.VIX)

Brent crude futures jumped more than 3.5% to cross $100 a barrel for the first time since September 2014.

West Texas Intermediate jumped 4.6 percent to $96.22 a barrel, its highest level since August 2014, while gold jumped more than 1.7 percent to its highest level since early January 2021.

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This dive in search of safety also saw yields of German AAA-rated government bonds drop by eight basis points to 1.139%, the lowest in three weeks. . The benchmark 10-year yield in the US fell sharply as well, falling to 1.86% from its US close of 1.977% before climbing back to 1.90%.

Investors are also grappling with the possibility of an imminent policy tightening by the US Federal Reserve to combat 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. FEDWATCH

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

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Additional reporting by Sujata Rao in London and Andrew Galbraith in Shanghai; Editing by Angus McSwan

Our criteria: Thomson Reuters Trust Principles.