Global Markets Slide On Mounting Ukraine Tensions
US index futures and global stocks extended their Friday losses on Monday, as worries about growing geopolitical conflict in Ukraine sparked concerns about global economic growth and adding to concerns about inflation and the prospect of aggressive Fed rate hikes to tame it. Nasdaq futures were down 1.2% by 715 a.m. ET after earlier sliding as much as 1.5%. S&P 500 futures slipped 0.8%, setting up the benchmark U.S. index to fall further from a two-week low reached on Friday. Treasury yields dropped further from a multi-year high hit on Friday and gold rose, while bitcoin extended its sharp decline from Friday. Focal points Monday include comments by St. Louis Fed President James Bullard at 8:30am ET. Airline stocks slid in premarket trading, following European peers lower, as growing concerns about geopolitical risks over Ukraine ripple through global markets. Lockheed Martin Corp. scrapped its bid to buy Aerojet Rocketdyne Holdings Inc. after the Federal Trade Commission sued to block the deal. Here are some other notable premarket movers:
Michael Every
Valentine’s Day should be filled with love, but there is very little of that in the air. Neither are there civilian aircraft over Ukraine given it is apparently now impossible for them to get insurance, a huge blow to an already weak economy. In short, markets are belatedly waking up to the geopolitical risks posed by Russian military action against Ukraine. We now even have an alleged potential start date, with all the usual caveats – Wednesday, February 16.
Of course, Russia continues to vociferously deny it has any such intentions, and correctly points to the US not being a good actor when it comes to casus belli. Then again, Moscow just refused to comply with an official Organization for Security and Co-operation in Europe (OSCE) request to transparently explain what its military is doing all around Ukraine’s borders. Said OSCE observers are now being pulled out of eastern Ukraine; a flood of countries are pulling ambassadors or citizens out - including Russia; Ukraine’s army has reportedly had its leave cancelled; and President Zelenskiy has asked President Biden to come to Kyiv as a demonstration that all is well. So, everyone who had been acting pragmatically is now head over heels – but not in love.
What are markets to do should this grim assessment prove accurate? Obviously, risk off, tempering some of the recent surge in bond yields; yet the direct economic impact of a Russian attack is small provided it is not sustained, even if there would be immediate disruption to markets of the kind already seen (i.e., no commercial flights/shipping). An economic history paper (‘The Effect of War Risk on Managerial and Investor Behaviour’) also argues firms cancel IPOs or delist, and become more risk averse.
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