Global markets closed in mixed territory on Monday after major indexes recovered from early losses, showing a continuation of the previous week's volatility amid fast-growing sanctions penalizing Russia for its invasion of Ukraine.
Stocks initially declined ahead of another busy week of earnings and economic data as investors kept their focus on the fast-unfolding crisis, with emergency United Nations meetings Monday while delegations from Russia and Ukraine convened for the first time on the Belarus border. The latter talks concluded, but with plans to continue, amid a backdrop of bombardment in Kharkiv, Ukraine's second-biggest city. Recent sanctions targeting major Russian banks and companies have enraged Russian President Vladimir Putin, who called the measures "illegitimate" and ordered his nuclear forces to a higher state of alert.
Major U.S. indexes dipped at the opening bell and oscillated in afternoon trading. The Dow closed down 166 points, or 0.5%. The broader S&P 500 was down about 11 points, or 0.24%, while the tech-heavy Nasdaq ended the day up 56 points, or 0.41%. All three are down more than 7% year to date, according to MarketWatch.
European markets also closed in the red despite clawing back some losses, with France's CAC 40 declining 1.4% and Germany's DAX giving up more than 0.7%. Asian markets were mixed at the close, with most indexes notching moderate gains, while Hong Kong's Hang Seng Index posted a mild decline of 0.25%.
Markets loathe uncertainty, and volatility is likely to rage as investors grapple with the lack of an immediate resolution of the Ukraine-Russia conflict on the horizon, according to David Bahnsen, chief investment officer of the Bahnsen Group.
Although the U.S. market fundamentals have weathered the storm so far, "sentiment-driven concerns are unlikely to change anytime soon," Bahnsen said Monday in comments emailed to The Washington Post. "From a market perspective, sanctions against Russia will likely have the largest impact on currency markets, including the ruble, the Euro and the dollar."
In recent days, the United States and its allies have moved to bar several major Russian banks from SWIFT (a global monetary transfer service), crack down on Russian oligarchs and prevent Russia's central bank from bailing out the domestic economy.
Russia responded by more than doubling its key interest rate from 9.5% to 20% on Monday. In a statement, the Bank of Russia said the hike, one of the largest one-time increases in recent memory, was because of a drastic change in "external conditions for the Russian economy." The bank also froze the opening of its stock market and delayed trading on domestic debt and currency markets.
Russia's economy was already showing signs of severe distress before the new measures were implemented, with Russians flocking to ATMs in a desperate bid to withdraw cash as the ruble weakened. Last week, as the incursion into Ukraine unfolded, Moscow's MOEX index endured one of the steepest equity crashes in stock market history.
On Monday, the New York Stock Exchange and the Nasdaq halted trading of several Russian-owned, U.S.-listed companies citing "regulatory concern." E-commerce giant Ozon Holdings and mining giant Mechel PAO were among those frozen. The Wall Street Journal reported that the halts would be temporary and would not extend to delisting, when stocks are permanently kicked off an exchange.
Other consequences are piling up, such as Russia's move Monday to ban air carriers from 36 countries, including European nations and Canada, from its massive, highly trafficked airspace after the European Union took similar action against Russian airlines. This will force major airlines to take longer, more circuitous routes to Asia and the Middle East, likely increasing the cost of ticket prices and jet fuel for travelers.
Travel stocks slumped in response, with United sliding 3.1% and Delta 3.9%, Southwest dropping 3% and American sliding 1.2%. Carnival and Royal Caribbean cruise lines both dipped more than 3.5%.
The maelstrom of disruption is arriving at a moment when the global economy is grappling with a host of pandemic-era stressors, from chaotic supply chains to widespread labor shortages. Although investors typically shrug off geopolitical tensions, the Ukraine crisis is weighing heavily on the markets because of Russia's central role as a global energy producer. Russia produces about 10% of the world's oil supply, on par with the United States and Saudi Arabia, and surging energy costs will ripple quickly through the economy, fueling inflation that is already threatening the economic recovery.
The historical record suggests that military conflicts and related geopolitical disruptions usually do more short-term damage to markets than they change overall sentiment and trends, according to Chris Larkin, managing director of trading at E-Trade from Morgan Stanley. Even after the immediate, headline-based volatility subsides, there will be many challenges for investors to contend with, Larkin said Monday in comments emailed to The Post.
"The macro factors that were in place before a shock will, in time, reassert themselves," Larkin said. "So pressures like high inflation and rising interest rates will remain after the market fully absorbs the shock of the events in Europe."
Oil prices surged higher amid the rising tensions, which have seen oil prices pushed beyond $100 per barrel in recent sessions. Brent crude, the international oil benchmark, was trading roughly 4.4% higher Monday, around $98.3 per barrel. West Texas Intermediate crude, the U.S. oil benchmark, also climbed 4.2%, to trade above $95 per barrel.
Since December, oil prices have risen more than 40%, influenced in part by speculation that Putin was preparing to launch an attack. President Joe Biden has said that limiting the pain Americans feel at the gas pump is "critical," and that U.S. officials are working with allies to secure releases from the global oil reserve.
Gold, a Russian export and investor safe haven in times of turmoil, continued its upward march. On Monday, it was trading more than 0.8% higher, around $1,903.30 per troy ounce.
Other commodities tied to Russia and Ukraine, such as aluminum, wheat, corn and nickel, were trading at multiyear highs Monday because of anticipated disruption.
Government bonds, another safe haven, also saw pressure amid the tensions. The yield on the 10-year U.S. Treasury note edged down to 1.8%. Bond yields move inversely to prices.
THE WASHINGTON POST