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Stocks fall as geopolitical tension escalates, oil tops $100, gold surges, bond yields dips

ukraine tank

Asia markets are set to open lower following a sharp selloff in both EU and the US markets overnight amid the intensifying military conflict between Russia and Ukraine. Risk-off sentiment prevails across the broader markets, with bond yields falling further, bank stocks deepening losses, and commodities prices spiking.

SPI futures are indicating a 0.7% drop on the S&P/ASX 200 at the open, and the NZX 50 was down 0.3% this morning in the first half-hour of trading.

US and EU stocks

EU stocks plunged due to concerns of a potential backfire of the sanctions on Russia in the region. Euro Stoxx 50 tumbled 4.04%, DAX declined 3.85%, and CAC 40 slid 3.94%.  

All three US major indices finished lower. The Dow Jones Industrial Average fell 1.71%, the S&P 500 slid 1.55%, and Nasdaq was down 1.59%.

The energy was the only sector that finished higher in the S&P 500 due to spiking oil prices. The crude oil futures soared above $US100 overnight.  Occidental shares jumped for the second straight trading day, up 7%, and Chevron gained for the third session, up 4%. The defense stock, Lockheed Martin and Northrop Grumman Corp surged further, up 5.3% and 3.1% respectively.

Bank stocks fell for the fourth trading day, down 3.7%, hit by Russia’s sanctions and falling bond yields. JPMorgan Chase fell 3.8%, Wells Fargo declined 5.69%, and Goldman Sachs was down 3.78%.

Airline stocks also suffered from the soaring energy prices and operation suspension over the war zone, with the major aircraft carriers, including Delta Airline and United Airline both falling more than 5%.

Tesla Motor finished slightly lower as the EV maker is expected to benefit from higher traditional fuel prices. Major chipmaker stocks fell on supply chain disruption concerns caused by the Ukraine crisis. Coinbase was up 3% with bitcoin’s price surging to above $US44,000.

On the earnings front, Lucid Group shares slumped 13% on missed fourth-quarter earnings and a weak outlook. Zoom stocks fell 7% after the video communication provider announced it had lost three-quarters of its market value since the peak in October last year.

Treasuries

The government bond yields fell further as safe-haven demands rise. The 10-year US Treasury yield fell to 1.73 %. The 2-year Treasury yield slid down to 1.33%.

Germany 10-year Bond Yield fell to 0.08%, and the France 10-year Bond Yield slipped to 0.36%. The UK 10-year Gilt yield was down to 1.12%.

Commodities

The commodity prices spiked further. Gold futures surged US$43, to US$1,943 per ounce, and silver futures gained US$1.07, or 4.41%, to US$25.44 per ounce.

Crude oil prices skyrocketed despite the members of the International Energy Agency agreeing on 60 million barrels of crude oil deployment. WTI futures price spiked 9%, to US$104.41. Brent crude futures rose 7.8%, to US$105.68.

Currencies

The USD strengthened as a safe-haven asset. The dollar index rose 0.61%, to 97.28. The Eurodollar, British pound and Swiss Franc all weakened against the USD, suffering from the impact of the Ukraine crisis, while AUD and NZD were more resilient. The Canadian dollar was also down against the greenback.

Cryptocurrencies

The crypto markets consolidated. The digital tokens have been benefiting from the extended sanctions on Russia for the decentralized functions in international transactions. Bitcoin rose 5.7%, to above US$44,000, and Ethereum was up 5%, to above US$2,900.


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