Rising military tensions on the border between Ukraine and Russia have sent global markets into a tailspin of risk aversion to begin the week.
In the United States, the S&P 500 is trading down 1.1% at 1839, while 10-year U.S. Treasury futures are up 0.4%, and the yield on the 10-year Treasury note is 2.61%, four basis points below Friday’s close.
Stock markets across Europe are down anywhere from 1.5% (in London) to 3.4% (in Germany), and government bonds across the continent are rallying, with the exception of those in Portugal and Greece. Overnight, Asian equity indices sold off as well.
Russia’s stock market closed down 12%, and the Russian ruble is the worst performer against the U.S. dollar today — down 2.0%. 10-year yields on local-currency Russian government bonds are 45 basis points higher at 8.72%, while 10-year yields on dollar-denominated Russian bonds are 29 basis points higher at 4.87%.
NYMEX crude oil futures are up 2.2%, trading around $US104.80 a barrel.
“Markets may be soon focusing on threats to risk appetite going beyond Ukraine,” says Valentin Marinov, European head of G10 FX strategy at Citi.
“Disappointing payroll data or PMIs this week could be the triggers for more unwinding of long positions in risk-correlated assets. Lack of policy action by the ECB or indications that the Chinese Communist Party may tolerate sub-target growth could add to market uncertainty in coming days. Defensive trades may do well in this environment with liquid safe haven currencies like JPY, CHF, EUR and USD outperforming.”
The charts below show the moves across various markets. Across the top from left to right are S&P 500 futures, the U.S. dollar-Japanese yen exchange rate, and the euro-U.S. dollar exchange rate. Across the bottom are gold futures, 10-year U.S. Treasury note futures, and NYMEX crude oil futures.