*The rouble fell to as low as 80.0650 against the dollar during Putin's lengthy televised address to the Russian nation but pared some losses as Putin announced his decision, which he said would find support among Russian people.*
*The sharp drop in the rouble from levels around 70 to the greenback seen just four months ago is expected to fuel already high inflation, one of the main concerns among Russians, which would dent the country's already falling living standards.*
No Russian assets were left unscathed, with stocks cascading to their lowest since early November 2020 and bond yields, which move inversely to prices, soaring to their highest since January 2016.
Goldman Sachs analysts said it now seemed plausible that geopolitical risks in the Ukraine-Russia standoff were starting to have a meaningful impact on global assets.
The prospect of a possible summit between Putin and U.S. President Joe Biden, as well as upcoming talks between the United States and Russia's top diplomats on Feb. 24, had given investors a glimmer of hope earlier in the session.
Despite Moscow's repeated denials of Western statements saying that it plans to invade neighbouring Ukraine, Russian assets have been hammered by fears of a military conflict that would almost certainly trigger sweeping new Western sanctions against Moscow.
Washington has prepared an initial package of sanctions against Russia that includes barring U.S. financial institutions from processing transactions for major Russian banks, three people familiar with the matter told Reuters.
Oil major Rosneft's shares also dropped 13.3%.
*A White House official told NBC News said that Biden spoke to Ukrainian President Volodymyr Zelenskyy on Monday afternoon for nearly 40 minutes.*
The dispute is worsening at the same time another potential threat to the global economy -- higher interest rates from central banks, including the Federal Reserve -- looms on the horizon.
*Traders are also keeping an eye on the Federal Reserve, as the U.S. central bank is expected to raise rates multiple times starting next month. According to the CME Group’s FedWatch tool, traders are betting that there is a 100% chance of a Fed rate hike after the March 15-16 meeting.*
*Expectations of tighter monetary policy have put pressure on stocks, particularly those in rate-sensitive sectors like tech, and have sent Treasury yield sharply higher to start 2022. The benchmark 10-year Treasury yield ended last week around 1.93% after briefly breaking above 2%. The 10-year began 2022 trading at around 1.51%.*
*Meanwhile, Wall Street is preparing for the tail-end of the corporate earnings season, with Home Depot and eBay among the companies set to report this week. It has been a solid earnings season thus far: Of the more than 400 S&P 500 companies that have posted fourth-quarter earnings, 77.7% have beaten analyst expectations, according to FactSet.*
“In addition to the concerns about the Fed’s ability to fight inflation, the specter of war has been added to investors’ plate,” Paul Nolte, portfolio manager at Kingsview Investment Management, wrote in a report Monday. “It may be a bit easier to handicap the Fed than it will to guess what Putin will do. Volatility will likely continue to be the norm into the second quarter.”
Futures on 10-year U.S. Treasuries rose, suggesting renewed demand for a haven; the notes themselves aren’t trading Monday because of the U.S. holiday. Crude oil futures rose.
The Ukraine standoff coupled with worry that tightening Fed monetary policy could choke growth in the world’s biggest economy raise the likelihood of more swings in markets in an already volatile year.
“Global data and central banks’ stance on tightening are all taking a back seat to Ukraine, with markets nervously awaiting the next headline,” said Su-Lin Ong, head of Australian economic and fixed-income strategy at Royal Bank of Canada. “Thinner liquidity because of the U.S. holiday adds to the anxiety.”
By: via @AlliesFin Serve Stock Market
