Ukraine crisis: US, Russian and European markets down; gold, oil, grains prices up
US, Russian and European stock markets on Monday tumbled and gold, oil, grains prices rose as investors retreated from stocks and other riskier investments due to rising tensions in the Ukraine crisis.world Updated: Mar 03, 2014 23:02 IST
US stocks on Monday tumbled in early trade as investors retreated from stocks and other riskier investments due to rising tensions in the Ukraine crisis.
Russia also paid a financial price on the same day for its military intervention in neighbouring Ukraine, with stocks, bonds and the rouble plunging as President Vladimir Putin's forces tightened their grip on the Russian-speaking Crimea region.
Europe's main stock market indices closed lower amid a standoff between Russia and Ukraine, with Frankfurt's DAX 30 tumbling 3.44% to 9,358.89 points.
London's FTSE 100 dropped 1.49% to 6,708.35 points, and Paris's CAC 40 shed 2.66% to 4,290.87 points.
German stock market closes down 3.44%.
Gold, oil rise as Ukraine tensions sent crude oil and prices for gold and government debt higher as investors sought safe havens.
US stocks fall
Dow Jones industrial average drops 200 points as tensions rise over standoff in Ukraine.
The broad-based S&P 500 declined 9.16 (0.49%) to 1,850.29, while the tech-rich Nasdaq Composite Index lost 27.06 (0.63%) at 4,281.06.
British Foreign Secretary William Hague warned Russia of "consequences and costs" as he met Ukraine's Western-backed leaders in Kiev in the wake of Russia's de facto occupation of Crimea.
The decline in US equities followed sharp drops in European stock markets. London's FTSE 100 was down 1.5%, the German DAX slid 2.9% and the French CAC-40 dropped 2.0%.
"Risk aversion is rife in the markets on Monday, as the Ukraine crisis escalated, further prompting investors to rebalance their portfolios away from stocks and towards commodities and other safe-haven assets," said Alpari analyst Craig Erlam.
Some stocks with exposure to Russia suffered, including Yandex, which operates Russia's largest search engine. It plunged 10.4 %. Mobile TeleSystems OBSC, which provides mobile and broadband services in Russia, lost 7.4%.
Citigroup fell 1.3% following reports that it received subpoenas over its disclosure last week that it would cut $235 million in earnings due to fraud in Mexico.
The yield on the 10-year US Treasury fell to 2.63 percent from 2.66%, while the 30-year declined to 3.57% from 3.59 percent. Bond prices and yields move inversely.
Russian markets plunge
The Moscow stock market fell by 11.3%, wiping nearly $60 billion off the value of Russian companies in a day, and the central bank spent $10 billion of its reserves to prop up the rouble as investors took fright at escalating tensions with the West over the former Soviet republic.
Ukraine said Russia was building up armoured vehicles on its side of a narrow stretch of water closest to Crimea after Putin declared at the weekend he had the right to invade his neighbour to protect Russian interests and citizens.
Both sides have so far avoided bloodshed, but the market rout highlighted the damage the crisis could wreak on Russia's sluggish economy, making it harder to balance the budget and potentially undermining business and public support for Putin.
Russian Deputy Economy Minister Andrei Klepach said market "hysteria" would subside but strains with Brussels and Washington - which has threatened visa bans, asset freezes and trade curbs - would continue to weigh on the economy.
On the ground in Perevalnoye, half way between the Crimean capital of Simferopol and the Black Sea, hundreds of Russian troops in trucks and armoured vehicles - without national insignia on their uniforms - surrounded two military compounds, confining Ukrainian soldiers, who have refused to surrender, as virtual prisoners.
Ukraine called up reservists on Sunday and Washington threatened to isolate Russia economically after Putin's action provoked what Britain's foreign minister called "the biggest crisis in Europe in the twenty-first century".
European Union foreign ministers began emergency talks on Ukraine but diplomats said they would press for mediation to prevent escalation and hold in reserve the possibility of sanctions against Moscow.
The Organisation for Security and Cooperation in Europe (OSCE) said it was trying to convene an international contact group to help defuse the crisis after Germany said Chancellor Angela Merkel had convinced Putin to accept such an initiative.
Switzerland, which chairs the pan-European security body, said the contact group would support Ukraine during its transition and coordinate aid and could also discuss sending observers to monitor the rights of national minorities.
The United States urged Moscow to support sending OSCE observers to Ukraine to help defuse tension.
"There will be very, very broad consensus for that monitoring mission. We call on Russia to join that consensus, make the right choice and pull back its forces," US Assistant Secretary of State Victoria Nuland told OSCE envoys in Vienna.
MARKETS TUMBLE, GAZPROM HIT
The Russian central bank raised its key lending rate by 1.5 percentage points after the rouble fell to all-time lows against the dollar. The MICEX index of Moscow stocks tumbled 11.5% to 1,278 points at 1400 GMT. That meant the market capitalisation of the rouble-denominated index had fallen $58.4 billion since Friday's close.
The east-west tension also knocked 2-3% off European stock markets and sent safe haven gold to a four-month high.
Chicago wheat futures rose more than 5% and corn about 4% as tensions in Ukraine stoked fears of disruption to shipments from the Black Sea, one of the world's key grain-exporting zones.
Russian gas monopoly Gazprom, which supplies Europe through Ukraine, was down more nearly 14 percent.
Gazprom's finance chief warned Ukraine that it may hike gas prices from next month, accusing Kiev of a patchy payments record, but said gas transit to Europe was normal. Ukraine has increased gas imports in the last few days to beat a feared price rise, a spokesman for its gas transit monopoly said.
Ukraine's Prime Minister Arseny Yatseniuk, head of a pro-Western government that took power when former president Viktor Yanukovich, a Russian ally, fled on February 21 after three months of street protests against his rule, said Putin had effectively declared war on his country.
Yatseniuk said the government planned to slash spending by 14 to 16% as Ukraine prepares for talks with the International Monetary Fund to avert the danger of default.
Western leaders have sent a barrage of warnings to Putin against armed action, threatening economic and diplomatic consequences if Moscow goes further, but are not considering a military response.
A Ukrainian border guard spokesman said Russian ships had been moving around the Crimean port city of Sevastopol, where the Russian Black Sea Fleet has a base, and Russian forces had blocked mobile telephone services in some parts of Crimea.
He said Moscow was building up its armour near a ferry port on Russia's side of the 4.5 km (three mile) wide Kerch Strait, which separates Crimea from Russia.
"There are armoured vehicles on the other side of the strait. We can't predict whether or not they will put any vehicles on the ferry," the spokesman said by telephone.
Russian Prime Minister Dmitry Medvedev issued an order on Monday to push ahead with a plan agreed with the previous Kiev government to build a bridge over the strait, which would be its first direct land link to Crimea bypassing Ukraine.
Ukraine crisis pushes up gold, oil, grains
Crude prices rose more than $2 a barrel, gold futures jumped 2 % and top-rated euro zone government bonds surged as heightened tensions over Ukraine sent investors scrambling. Russia's stock market was the worst hit, though other equities markets, including Wall Street, also fell sharply.
Ukraine's hryvnia fell to a record low against the dollar and pushed the country's dollar bonds down 6 points. Safe-haven German Bund futures rose 65 ticks to 145.03. Banks took the most points off European stock indices, with lenders exposed to Ukraine and Russia falling sharply. Austria's Raiffeisen slumped 8.5 %, while France's Societe Generale and Italy's UniCredit both lost 5 %.
Crude oil prices jumped. Brent crude hit a peak of $112.39 a barrel, its highest since Dec. 30, and was up $2.27 at $111.34. U.S. crude jumped $2.09 to $104.68 a barrel. U.S. government bond prices rose, with the 10-year note up 11/32] in price to yield 2.6208 %.
(REUTERS AND AFP INPUTS)
First Published: Mar 03, 2014 21:12 IST