SHANGHAI The global stock market and U.S. bond yields dived on Thursday, while dollars, gold, and oil prices soared in the wake of the Russian military launching missiles on various Ukrainian cities and dropping troops along the south coast of Ukraine.
Just after Russian president Vladimir Putin said he had authorized a “special military” operation, explosions were heard in the quiet of the early morning in Kyiv, the Ukrainian capital city, and Moscow accused Kyiv’s Ukrainian government of orchestrating a large-scale invasion.
The United States and its allies will put “severe sanctions” on Russia following the terrorist attacks, U.S. President Joe Biden declared.
READ MORE: Russian forces strike significant cities in Ukraine.
The market rout of stocks in Asia is expected to persist in Europe and the United States, with a dramatic increase in commodity prices leading to concerns over the risk of inflation and economic growth.
The Euro Stoxx 50 futures and German DAX futures fell more than 3.5 percent in the early trades, and FTSE futures were down 2.
S&P 500 e-minis fell 2.3 percent, and Nasdaq futures dropped 2.8 percent, which puts this U.S. index on track towards confirming that it’s in the midst of a bear market.
The closing of less than 20 percent from the November 19 record-breaking conclusion of 16,057.437 points will confirm that the Nasdaq is in a bear market following a widely-used definition.
It would be the only bearish market in which was the year that the coronavirus outbreak devastated the global financial markets.
The Moscow Exchange announced a suspension of trading all day on Thursday.
In Asia, MSCI’s largest index of Asia-Pacific shares outside of Japan (.MIAPJ0000PUS) dropped more than 3.2 percent to its lowest point since November of 2020. Australian shares (.AXJO) shed more than 3% , while Chinese blue-chip shares (.CSI300) lost 2.2%.
Tokyo’s Nikkei (.N225) was 2.1% lower.
“The market has always tried to figure out whether (Russia) would end up at Donbass, and it appears like they’re moving towards Kyiv, which has always been one of the worst-case scenarios. We are in the middle of a long night trying to figure out the severity of this and the sanctions that will be implemented, as there will be a new round of sanctions against Putin and Russia. Russian administration” said Chris Weston, the director of research for Pepperstone.
“That’s where the worst-case or bear scenario would be in the market, and that’s exactly what we’re witnessing. There aren’t many buyers who are willing to risk their money, and there are many sellers out on the market, and this market is hitting extremely hard.”
The markets for assets have experienced increased volatility due to the escalating crisis. The Cboe Volatility Index, known as Wall Street’s fear gauge, increased by more than 55% in the last nine days. (.VIX)
Brent crude futures, which fluctuated between sharp increases and falls on Wednesday, increased by over 3.5 percent to surpass $100 per barrel, the highest level since the beginning of September in 2014.
West Texas Intermediate leaped 4.6 percent up to $96.22 per barrel. This is their highest level since August 2014.
Spot gold rose over 1.7 percent to hit the highest level since January 2021.
The steep decline in equity prices was triggered following U.S. stocks already took the brunt of the storm on Wednesday, which saw a Dow Jones Industrial Average (.DJI) down 1.38 percent to just barely over the level that could confirm the existence of a correction.
The S&P 500 (.SPX), which had proved a correction a day before, fell 1.84 percent to 4,225.5.
Investors have also been wrestling with the possibility of tightening policy through the U.S. Federal Reserve to tackle the rising rate of inflation that NAB analysts predict could be exacerbated by a commodity supply shock.
The expectations for an aggressive 50-basis-point increase at the March Fed meeting have dwindled, Fed funds futures continue to indicate at least six rate hikes in the coming year. FEDWATCH
However, immediate geopolitical risks weighed on U.S. yields on Thursday and pushed the standard U.S. 10-year yield down dramatically to 1.8681 percent against the U.S. close of 1.977 percent on Wednesday. The yield on the 2-year bond also dropped to 1.5 percent from closing off 1.6 percent.
The world’s flight to safety has boosted dollars, and the currency surged over half a percentage in a basket of essential trading partners to 96.715.
The euro was trading down 0.8 percent during the day to $1.1220.
The Russian currency rouble fell sharply after registering small gains earlier in the day. It dropped by as much as 5.77 percent in addition to a 3% decline against the dollar on Wednesday.
The market sell-off swept over to the cryptocurrency market, which saw bitcoin fall lower than $35,000 the very first time within a month.
“Markets are now better anticipating the likelihood of something terrible taking place. This, when combined with uncertainties, is a hazardous environment for us.
“Nobody wants to be exposed to risk in the first place,” said Rob Carnell, director of Asia Pacific research at ING.
