March 26, 2023

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Stocks falter as tensions in Ukraine escalate, investors turn to gold

Stocks falter as tensions in Ukraine escalate, investors turn to gold

LONDON (Reuters) – Stock markets fell on Thursday after Russian-backed separatists and Ukrainian government forces accused each other of firing shells, prompting traders to seek safety in government bonds and pushing gold prices to a new eight-month high.

The two sides traded accusations across the ceasefire line in eastern Ukraine, sparking alarm at a time when Russia has massed more than 100,000 troops near Ukraine’s border. The West accuses Russia of preparing for an invasion, while Moscow says it is withdrawing some troops and accuses Kiev of plotting an escalation to try to regain rebel-held territory by force. Read more

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

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In Europe, Euro Stokes (.stoxx) It was down 0.1% by 1150 GMT while the UK’s FTSE 100 was down 0.65%. (.FTSE). Strong corporate earnings in Europe helped keep losses in check.

Wall Street futures pointed to a lower open, while in Asia, the broadest MSCI Asia Pacific Index was (.MIAP00000PUS.) It made 0.15% higher at the close.

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 bought government bonds. US 10-year Treasury yields fell as much as 6 basis points and were last down 1 basis point at 2%.

Yields on German 10-year government bonds, the safe-haven asset in the Eurozone, were little changed at 0.267%.

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The Russian-Ukrainian crisis is worrying investors just as the markets were already struggling. Investors are concerned that the pace of monetary tightening – triggered by central banks needing to tame spiraling inflation – and cutting cheap liquidity will take more air out of high-value asset 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 $1,892 an ounce, up 1.2% during the session helped by jitters in the markets and a weak dollar.

gold price

Crude oil prices fell sharply, but retreated from their lowest levels. They had earlier fallen more than 2% on optimism that negotiations would salvage the 2015 Iran nuclear deal and bring more supplies to a tight market.

US West Texas Intermediate (WTI) crude last fell 2.1% to $91.65 a barrel, while Brent crude fell 1.86% to $93.05 a barrel.

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

The dollar, which is also considered a safe haven, initially rose against most currencies, but those gains were pared and the dollar fell slightly by 1150 GMT – a sign that investors were not yet afraid of tensions between Russia and Ukraine.

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However, the Japanese yen, a currency that investors usually buy when they are nervous, hit its strongest level since February 7, with the dollar down 0.4% to 114.95 yen.

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

Our criteria: Thomson Reuters Trust Principles.