LONDON: Global stocks sank Monday, as fears of a conflict between Ukraine and Russia sent investors fleeing to safe-haven assets like gold and the yen, while oil prices soared.
In afternoon deals, London’s benchmark FTSE 100 index fell 1.53 percent to 6,705.85 points and in Paris the CAC 40 dropped 2.01 percent to 4,319.30 points.
Frankfurt’s DAX 30 plunged more than 3.0 percent at one stage but later stood at 9,411.37 points, down 2.90 percent from Friday’s closing level.
Russian stocks plummeted, with the MICEX market closing down 10.79 percent and the other main equities index the RTS slumping 12.01 percent, and the ruble struck historic lows against both the dollar and euro, forcing the central bank to spring an interest rate hike.
Safe-haven assets were in demand, with gold surging to a four-month peak $1,326.50 per ounce, but later slid back to $1,344.25.
“It’s the Crimean peninsula that is still dominating and it’s likely to for most of the day and however long this crisis goes on for,” said Alpari analyst James Hughes.
“We are looking at the safe havens as the obvious movers especially in currencies with the Swiss franc and yen both moving ahead. Equity markets have taken a pretty big hit so far.”
The Swiss franc hit a 14-month high of 1.2104 francs to the euro, while the dollar sank to 101.37 yen as investors turned to the Japanese unit.
The yield on 10-year German government bonds, another safe haven asset, fell to 1.569 percent from 1.624 percent on Friday.
The European single currency meanwhile eased to $1.3776 from $1.3800 in New York late on Friday.
Russian troops and military planes poured into the predominantly Russian-speaking Crimean peninsula on Monday, Ukrainian border guards said, after President Vladimir Putin won parliamentary green light to deploy soldiers to the flashpoint region in the southeast of Ukraine.
Leaders of the G7 industrial powers on Sunday condemned Russia’s “clear violation” of Ukraine’s sovereignty, while U.S. Secretary of State John Kerry bluntly warned that Moscow risked losing its G8 seat over its “brazen act of aggression” in the former Soviet state.
Stocks ‘hammered’ by Ukraine
“Rising tensions between Russia and the West has set investors on a war footing … with stocks being hammered,” said Mike McCudden, head of derivatives at online broker Interactive Investor.
Asian equities mostly fell on Monday, with Hong Kong tumbling 1.47 percent, Tokyo down 1.27 percent and Sydney shedding 0.38 percent.
Kit Juckes, head of currency strategy at Societe Generale, said “the weekend’s events will be followed by a lot of uncertainty and further risk aversion as a diplomatic solution is sought.”
US markets also opened lower, with the Dow Jones Industrial Average dropping 0.79 percent to 16,192.59 points after five minutes of trading.
The broad-based S&P 500 declined 0.71 percent to 1,846.29 points, while the tech-rich Nasdaq Composite Index lost 1.01 percent to 4,264.78.
Russia’s central bank meanwhile hiked its main interest rate to 7.0 percent from 5.50 percent in a clear bid to support the plunging ruble and stem an already alarming capital flight amid the soaring tensions.
“The decision by Russia’s central bank to raise interest rates … is a clear attempt to stem outflows of capital from financial markets following the escalation of the crisis in Ukraine over the weekend,” said Neil Shearing, emerging markets economist at Capital Economics in London.
Oil market jumps
With Russia also a huge supplier of oil to European nations, the price of both main crude contracts also spiked.
New York’s main contract, West Texas Intermediate for April delivery, climbed $1.94 to $104.53, and Brent North Sea crude for April rallied $2.77 to $111.84 in midday London deals.
“The weekend’s headlines have sent traders heading for their bunkers,” said Capital Spreads dealer Jonathan Sudaria.
On the upside in Asia, Chinese shares finished 0.92 percent higher on hopes for positive policies at the annual meeting of the country’s legislature, which begins Wednesday.
However, there were renewed worries about the health of China’s economy after Beijing said its official purchasing managers’ index (PMI) of manufacturing activity fell to an eight-month low of 50.2 last month.
The figure represents the third straight drop following a reading of 50.5 in January, 51.0 in December and 51.4 in November. A figure above 50 indicates expansion while one below shows contraction.