After closing down 13% on Monday, the Russian RTS index opened down 6.85% on Tuesday, and then the decline quickly expanded to 10%; The Russian MOEX stock index fell about 6%, which fell 10.5% last day. In the foreign exchange market, the US dollar rose 1.2% against the Russian Ruble on Tuesday.
Russian President Vladimir Putin signed a presidential decree late Monday recognizing the independence of the “people’s Republic of Donetsk” and the “people’s Republic of Lugansk”. Since then, the United States and the European Union announced that they would impose sanctions on Russia.
Note: 1-hour K-line chart of Russia RTS index
On Tuesday, global stock markets also plunged one after another. For example, European Stoxx 50 futures fell 2%; U.S. stock index futures also fell sharply, and the S & P 500 futures index fell 1.8%; Japan’s Nikkei index closed down 1.7%. Spot gold hit a six-month high of $1911.94; European natural gas rose more than 13%.
European stocks fell sharply at the opening of trading on Tuesday. Germany’s DAX30 index fell 2.63%, Britain’s FTSE 100 index fell 1.62%, France’s CAC40 index fell 0.91% and Europe’s Stoxx 50 index fell 2.4%.
Tensions also pushed U.S. Treasury yields lower, with the benchmark 10-year Treasury yield falling 5.5 basis points to 1.8715%. The bet on the fed to raise interest rates has also been relaxed, and the possibility of raising interest rates by 50 basis points next month has dropped to less than 20%.
Facing the continuous collapse of China’s stock market, the Russian central bank said on Tuesday that it was ready to support the financial market; Banks can value stocks and bonds at the price of February 18. The Russian central bank said the financial market situation was still controllable. Subsequently, the decline of the Russian RTS index narrowed to 6%.
Note: 15 minute K-line chart of Russia RTS index
war threat
Russian President Vladimir Putin acknowledged the independence of two regions in eastern Ukraine on Monday and ordered Russian troops to carry out peacekeeping operations in the region, further exacerbating tensions between Russia and Ukraine. Investors are worried that the crisis could trigger a large-scale war.
The United States and Europe condemned this and vowed to impose new sanctions. The Ukrainian foreign minister said he had been assured that the EU would respond “resolutely and unanimously”.
a lot of uncertainty
The continuous fermentation of the situation in Russia and Ukraine has brought a lot of uncertainty to the global market, which investors dislike most. Geopolitical risks have even led investors to reduce their bets on the Fed’s enthusiasm to tighten monetary policy to fight inflation this year.
Carlos Casanova, a senior Asian economist at Ubp, believes that after Russia’s latest action, “we are very close to military intervention, which will certainly strengthen the risk aversion in the market.” the short-term market fluctuations caused by geopolitical factors and the Federal Reserve are “ruthless”. Casanova said the consequences would be higher oil prices, stock selling and people flocking to safe haven assets such as the yen.
Goldman Sachs said that if the conflict in Ukraine “breaks out completely” and Western countries impose “punitive sanctions” on Russia, the S & P 500 index in the United States may fall another 6% compared with the closing price on Friday, and the stock markets in Europe and Japan will fall even more.
Damien mccolough, fixed income research director of West The Pacific Securities Co.Ltd(601099) bank, said: “in the current environment, it is very difficult to assess the risk return of assets, because the conflict between Russia and Ukraine may further escalate.”
LORI calvasina, head of U.S. equity strategy at Royal Bank of Canada capital markets, wrote in a note: “it is right for stock market investors to pay high attention to the tensions between Russia and Ukraine. Because they may exacerbate the inflation background, many investors and companies had expected inflation to improve in the second half of 2022, and high inflation poses a risk to the company’s profit outlook.”
