Daily Management Review

Markets Around The World Fall On Ukraine Issue, Rouble Plummets


Markets Around The World Fall On Ukraine Issue, Rouble Plummets
On Monday, stocks fell all over the world, along with a rise in oil prices, while the rouble plummeted to record lows with the West stepping up sanctions against Russia in response to its invasion of Ukraine. The latest sanctions included banning banks from using the SWIFT global payments system.
As the rouble fell over 30 per cent to historic lows against the dollar, Russia's central bank boosted its main interest rate to 20 per cent from 9.5 per cent in an emergency action, and officials warned export-oriented enterprises to be ready to sell foreign currency. 
The effects of stronger sanctions imposed by the West over the weekend spilled out across financial markets as an economic crisis loomed in Russia.
The stock market in Europe has fallen by 2 per cent. The most vulnerable European banks, such as Austria's Raiffeisen Bank, UniCredit, and Societe Generale, all plunged between 9 and 15 per cent while there was a fall of 7 per cent in the stick price of the euro zone banking index. 
Although MSCI's broad index of Asia shares and Japan's Nikkei both eked out tiny gains, U.S. stock futures were in the red.
"The trading environment is highly dynamic, and we maintain a defensive stance as things could get a lot worse from here," said Peter Garnry, head of equity strategy at Saxo Bank.
Meanwhile, oil prices soared as Russian President Vladimir Putin placed nuclear-armed forces on high alert on Sunday, the fourth day of the worst attack on a European state since World War II.
Fears that oil supplies from the world's second-largest supplier will be interrupted have increased as tensions have risen, driving Brent crude futures up 5 per cent to $102.86. At $96.24 a barrel, U.S. West Texas Intermediate oil futures were up $4.62, or about 5.0  per cent.
"I am telling clients all we know for certain is that energy prices are going to be higher, and there are going to be some beneficiaries," said John Milroy, Ord Minnett financial advisor in Sydney.
"It's an old cliché, but it's true that uncertainty drives moves in both directions."
As market volatility persisted, investors sought refuge in the dollar, Swiss franc, and Japanese yen.
The euro sank 1 per cent to $1.1168 and the yen fell 0.9 per cent to 129.08 yen, while the riskier Australian and New Zealand currencies fell 0.5 and 0.3 per cent, respectively. Sovereign bonds, such as US Treasuries and German Bunds, were in high demand, since they are considered among the safest investments to own internationally. In London trading, the 10-year US Treasury yield fell 7 basis points to 1.90 per cent, while corresponding German rates fell 6 basis points to 0.16 per cent.
Money markets have pushed back expectations for rate hikes, with investors now pricing in approximately 30 basis points of tightening from the European Central Bank this year, down from 35 basis points late last week.
At the time of writing, gold was up 0.61 per cent to roughly $1,899. Russia's rouble plunged over 30 per cent to a historic low of 120 per dollar, before recovering some ground to trade at slightly over 100 per dollar last week. As investors sold Russian assets, MSCI's Russia equities index fell 25 per cent, while London and Frankfurt-listed Russian stock exchange traded funds (ETFs) fell more than 35 per cent.