Some of the main European stock markets fell again and oil soared even more on Wednesday (2), as Russia showed no signs of stopping its attack on Ukraine.
A week after Russian President Vladimir Putin ordered a full-scale invasion of his neighbor, bombings of Ukrainian cities continued as Western nations tightened sanctions on Moscow.
US President Joe Biden banned Russian planes from US airspace, saying Putin “had no idea what was to come”.
European stock indices were on their second day of decline, with the STOXX 600 (which brings together 600 companies of different sizes across Europe) down 0.7% in the morning in London (local time), while Germany’s DAX was down 1 .2% on the day.
European bank shares fell further after Russia’s European arm of Sberbank was forced to close.
The MSCI world stock index, which tracks stocks in 50 countries, fell 0.4%.
Russia said its forces took control of Ukraine’s first sizable city on Wednesday, capturing Kherson in the south as fighting spread across the country.
“The fact that it’s been lasting and it’s becoming more brutal is clearly changing the growth outlook. And that’s what we’ve seen in terms of market reaction, stocks going down and bonds going up quite significantly,” said Antoine Lesne, head of strategy. and ETF (Exchange Trade Funds) research on the State Street SPDR ETF.
Oil prices have soared, with Brent crude hitting $113.02 — the highest since 2014 — and U.S. crude approaching its 2013 peak.
The US ten-year yield was at 1.7258%, having fallen sharply in the previous two sessions.
Antoine Lesne says flows of exchange-traded funds (ETFs) in the US increased last week as investors used them to take on risk, but in Europe the flows were “softer”. Lesne said he has not suspended any funds with exposure to Russia.
The best-performing ETFs were those exposed to European healthcare and utilities, he said, as well as energy-linked ETFs.
Asset manager BlackRock said on Tuesday that it is consulting with regulators, index providers and other market participants to help clients exit their positions in Russian bonds where permitted.
The ruble is down around 3.5% on the day against the dollar, having weakened to a record low of 117 per dollar on Tuesday.
Foreign investors are effectively locked into their holdings of ruble-denominated bonds, known as OFZs, after the Russian central bank temporarily suspended coupon payments and a major offshore settlement system stopped accepting Russian assets.
The US dollar index rose 0.5% to its highest level since mid-2020 as investors sought safer assets.
Eurozone government bond yields have stabilised, having seen a dramatic repricing on Tuesday as traders scaled back their bets on ECB (European Central Bank) rate hikes this year.
While attention remains focused on Ukraine, investors will also be on the lookout for preliminary euro area inflation data, which may have climbed to 5.4% in February.
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