Global markets tumbled Thursday as Russia launched a military assault on Ukraine, with investors bracing for an extended period of turmoil and energy-related disruptions.
Most major Asian stock indexes fell about 3%, and markets in Europe dropped just as sharply in the early hours. For many indexes, it was the steepest decline since late last year, when the omicron variant of the coronavirus sparked fears of another dark phase in the pandemic.
U.S. markets were poised to follow suit, with the three major indexes projected to slide 2.5% or more at the opening bell. That would put the Dow and the S&P 500 both in corrections, and push the Nasdaq closer to a bear market – defined as coming down 20% or more from a recent high.
Dan Ives, managing director at Wedbush Securities, said that tech names are likely to see “significant pain” when the market opens, as the escalating tensions send investors running for safer assets.
“The risk-off environment that has been in effect so far in 2022 will now be significantly exacerbated,” Ives said in comments emailed Thursday to The Post, noting that the damage will be “hard for already battered tech investors to absorb.”
Though the Russian incursion is just beginning, signals Thursday – including strikes across Ukraine – suggested a wide-ranging military offensive that would trigger deep sanctions from the United States and European Union, hurting not just the Russian economy, but the whole world’s. Consumers around the globe are already facing widespread price increases tied to raging inflation and troubled energy markets, and now pains are likely to grow more acute.
The price of Brent crude, the global benchmark, shot up 7.9% to nearly $101.50 a barrel – the first time it’s been in the triple digits since 2014 – while U.S. oil jumped 8.3% to $99.70. Russia is a dominant natural gas and oil exporter, particularly to Europe, and some of its supply transits via pipeline across Ukraine. Benchmark prices of aluminum, nickel, wheat and corn (other top exports from Russia and Ukraine) also soared to multiyear highs.
Russia has warned that Americans will fully feel the “consequences” of sanctions President Biden announced earlier this week. Biden has acknowledged that the crisis could lead to higher gasoline prices, while U.S. businesses have been warned to prepare for possible cyberattacks. More sanctions will follow if Russia invades Ukraine, Biden has pledged.
Markets loathe uncertainty, and the attack is arriving at a moment when the global economy is already wrestling with pandemic-related challenges in the form of soaring inflation, chaotic supply chains and labor shortages.
“Investor sentiment was already fragile because of rising inflation and the upwards direction of travel for interest rates, but confirmation of war and the associated alarming news headlines around the world are likely to see equity markets go through a difficult period for longer than people might have previously expected,” Russ Mould, investment director at AJ Bell, said Thursday in comments emailed to The Post.
Investors fled to safer assets, sending the yield on the 10-Year U.S. Treasury note sharply lower to 1.865%. Gold – a Russian export and an investor safe haven – soared nearly 3% to trade around $1965 per troy ounce.
For all the immediate financial reaction Thursday, no country absorbed greater losses than those in Russia, whose major stock market index nosedived some 45% in the early hours Thursday, hitting its lowest level since 2016. Trading was briefly suspended amid the free-fall. The ruble slumped to its weakest point in at least the past 10 years, giving Russians less spending power when they go abroad.
Oil prices have risen more than 40% since December, influenced in part by speculation that Putin might launch an attack as Russia amassed troops on three sides of Ukraine.
After Russia’s 2014 invasion of Crimea, Europe’s dependence on Russian energy held the bloc back from enforcing certain both-sides-suffer sanctions. But European leaders this time are likely to agree that a more severe response is necessary, and they are drawing up plans to wean themselves from dependence on Russian oil and gas.
That includes, most immediately, shelving the Nord Stream 2 gas pipeline between Germany and Russia. But any new energy strategy is certain to take years – and will come at a massive taxpayer expense.
An analysis last week from Barclays, the British bank, noted that Europe would struggle to “substitute large quantities of Russian oil and gas with alternative energy sources in other countries, especially in a short period of time.” The bank’s analysis said this could lead to rationing, higher prices, and ultimately cut into GDP growth.
Some of those concerns were evident in Thursday’s stock market, where Germany’s DAX index fell even more sharply than most, sliding 4.5% by midday. The index has lost more than 14% of its value since early January.
European Commission Ursula von der Leyen said the 27-nation bloc would convene later Thursday to discuss new sanctions. The measures, she said, would weaken Russia’s economic base and its “capacity to modernize” by freezing the country’s assets in the E.U. and stopping its access to the European financial market.
(c) 2022, The Washington Post · Chico Harlan, Taylor Telford
{Matzav.com}
