July 2, 2022

Stocks falter as tensions in Ukraine escalate, investors seek safety in bonds

Stocks falter as tensions in Ukraine escalate, investors seek safety in bonds

A worker protects from the rain under the Union flag umbrella as he passes the London Stock Exchange in London, Britain, October 1, 2008. REUTERS/Toby Melville/File Photo

Register now to get free unlimited access to Reuters.com

LONDON (Reuters) – Stocks fell on Thursday as investors fretted that Russian-backed separatists accused Ukrainian government forces of opening fire, as traders sought safety in government bonds and oil recognised some of its heavy early losses.

Russian-backed separatists in eastern Ukraine accused government forces of opening fire on their territory four times in the past 24 hours and said they were trying to find out if anyone had been injured or killed. Read more

The incidents come as Russia has massed more than 100,000 troops near Ukraine’s border, raising fears of an invasion.

Register now to get free unlimited access to Reuters.com

The losses in the stock markets have been widespread, although not as significant as they have been in recent sessions.

In Europe, Euro Stokes (.stoxx) It is down 0.2% while the UK’s FTSE 100 is down 0.7%. (.FTSE). Strong corporate earnings in Europe helped keep losses in check.

Wall Street futures pointed to a lower open, despite the broader MSCI Asia Pacific Index (.MIAP00000PUS) It gained 0.15%.

MSCI World Stock Index (.MIWD00000PUS.)which measures stocks in 50 countries, was slightly lower on the day.

Westpac analyst Sean Callow said markets are “clearly on edge” and fragile because many traders assumed the tension was easing.

Investors sought safety in government bonds and the yield on US 10-year bonds fell more than two basis points to 2%. There was also a drop in German 10-year government bond yields, the safe haven asset in the Eurozone.

The Russian-Ukrainian crisis is irritating investors at a time when markets are already struggling with concern that the pace of monetary tightening and the slashing of cheap cash will wipe out high-value stock prices. Most major markets experienced a sharp decline in 2022, with the Nasdaq Technology Index down 12%.

However, some investors advised clients not to panic about the geopolitical crisis.

“Withdrawals driven by geopolitical stress events are usually short-lived for well-diversified portfolios,” said Mark Heffel, chief investment officer at UBS Global Wealth Management.

He added that their main cause was to “reduce geopolitical tensions”.

golden spangle

Gold prices broke higher to an eight-month high of $1,890 an ounce, up 1.2% during the session, helped by broad market jitters and inflation concerns.

Crude oil reversed some losses after earlier falling more than 2% on optimism that negotiations will salvage the 2015 Iran nuclear deal and bring more supplies to a tight market.

By the afternoon, US West Texas Intermediate crude was down 1.2% to $92.46 a barrel, while Brent crude was down 1% to $93.80 a barrel.

Concerns about the Fed’s super-tightening campaign, which will likely include a 50 basis point hike next month, subsided overnight after minutes from the latest policy meeting signaled a more measured, data-driven approach from central bank officials. Read more

The dollar rose against most currencies but remained slightly lower during the week.

Register now to get free unlimited access to Reuters.com

Additional reporting by Kevin Buckland and Selena Lee in Tokyo. Editing by Kim Coogle

Our criteria: Thomson Reuters Trust Principles.