Global equity markets declined, while bond prices surged following reports that Ukraine launched long-range missiles into Russian territory. This uptick in conflict prompted investors to gravitate towards safe-haven currencies, including the US dollar, Japanese yen, and Swiss franc. Moscow confirmed that six Atacms missiles, manufactured in the US, were launched towards the Bryansk region of Russia.
The situation intensified after President Joe Biden eased restrictions concerning the use of such military hardware. High-ranking officials from both the US and Ukraine recognized the missile strikes that crossed into Russian land. Under President Putin’s redefined nuclear policy, a conventional assault on Russia by any country backed by a nuclear state is now classified as a collaborative attack.
This change expands the scenarios in which Russia could potentially mobilize its nuclear arsenal. The ongoing anxiety surrounding the comprehensive invasion of Ukraine, which has now entered its 1,000th day, has made a substantial mark on global financial markets. The Stoxx 600 index fell by over 1%, hitting its lowest point since August.
Global financial markets rattled by tensions
The FTSE 100 index witnessed a 0.5% decline during afternoon trading, reaching a three-month low. New York’s markets opened lower, with the Dow Jones Industrial Average dropping by 0.8%, and the wider S&P 500 decreasing by 0.4%.
The CBOE Volatility Index, known as Wall Street’s measure of fear, spiked by nearly 10%. Market analyst Fawad Razaqzada commented, “The significant concern here is how Russia will react. President Vladimir Putin’s endorsement of an updated nuclear doctrine expands the conditions under which Russia may utilize nuclear arms, particularly if faced with a major conventional assault on its homeland.
The deployment of atomic weaponry is unimaginable, yet we are approaching exceedingly perilous conditions.”
In the currency exchange arena, the pound depreciated against the US dollar to $1.265, while the euro experienced a 0.25% decline versus the Swiss franc and the dollar. Brad Bechtel, global head of FX at Jefferies, stated, “Geopolitical strife typically holds little significance for financial markets until it becomes critical. When US assets are impacting Russia and discussions of nuclear armament arise, it demands attention.”
This prevailing uncertainty has driven investors towards government bonds in the UK, US, and the eurozone, leading to decreases in yields and interest rates on the respective debts.
Market participants were also perturbed by the unexplained cutting of two undersea cables in the Baltic Sea. As tensions escalate, financial markets remain wary of the possibility of further developments and their ramifications for global economic security.
