Investors were bracing for a torrid day for Russian, Ukrainian, and wider global markets when they reopen on Tuesday after Vladimir Putin upped the ante in a crisis the West fears could unleash a major war.
In a lengthy televised address, the Russian president recognized two breakaway regions Donetsk and Luhansk in eastern Ukraine as independent entities and described Ukraine as an integral part of Russia’s history.
Tensions have already rattled global markets this year and wiped tens of billions of dollars off the value of Russian and Ukrainian assets, but Monday’s escalation is expected to cause much worse.
The specter of war on Europe’s eastern flank had flared on Monday, sending oil prices to a seven-year high, after Russian President Vladimir Putin ordered troops into the Donetsk and Luhansk regions of Ukraine. read more
The United States and its European allies started to announce harsh new sanctions in response, with German Chancellor Olaf Scholz warning that the Nord Stream 2 gas pipeline would now be denied certification to begin operating.
Germany obtains half its gas from Russia and had argued that Nord Stream 2 was primarily a commercial project to diversify energy supplies for Europe.
But it faced opposition within the European Union and from the United States on the grounds that it would increase Europe’s energy dependence on Russia, as well as deny Ukraine transit fees and make it more vulnerable to the Russian invasion.
Stocks already slumped in Europe and Asia after an increase in Ukraine tensions, and when Wall Street joins the selloff it’s likely that the loss of market value will be about $1 trillion. U.S. futures signal an early drop as investors cut risk and load up on safe-havens such as gold and U.S. Treasuries.
The biggest impact has been felt by Russian stocks amid growing worries that Western nations could slap sanctions on the country after President Vladimir Putin recognized two self-proclaimed separatist republics in eastern Ukraine and ordered troops to be sent to them. Russia’s main stocks index plunged as much as 19% for the week at one point.
The Dow plunged more than 600 points amid a broad sell-off Thursday as the Russia-Ukraine crisis sent investors scrambling for cover.
Stocks have oscillated in tandem with headlines in previous sessions, and Thursday was no different after the State Department said Russia had expelled the deputy chief of mission to the U.S. Embassy in Moscow. U.S. and NATO officials warned that there’s been no sign of de-escalation at the border.
“Every indication we have is they’re prepared to go into Ukraine, attack Ukraine,” President Biden told reporters Thursday at the White House.
By the market’s close, the tech-heavy Nasdaq skidded 407.38 points, or nearly 2.9 percent, to land at 13,716.72. The S&P 500 index shed 94.75 points, or 2.1 percent, to end at 4,380.26. The Dow Jones industrial average lost 622.24 points, or nearly 1.8 percent, to finish at 34,312.03.
Typically, markets tend to look through geopolitical tensions. But investors have been keeping a wary eye on the standoff given Russia’s role as one of the world’s biggest energy producers. The conflict could have significant ramifications for the economy, including exacerbating already high inflation. Biden has made clear that the United States and its allies would respond “decisively” in the event of a Russian invasion and impose “severe” costs.
“It’s no wonder investors don’t know which way to turn,” Craig Erlam, senior market analyst with OANDA, said Thursday in comments emailed to The Post. “Clearly, tensions are going to remain until we see a confirmed and substantial reduction of troops at the border.”
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