Investors fled riskier assets as tensions between the West and Russia over Ukraine escalated. Futures tracking the S&P 500 Index headed for a technical reversal.
S&P 500 March futures were down 1.4 percent at 8:38 a.m. in London, after falling as much as 2.2 percent from their Feb. 18 close and losing more than 10% of their value from an early-January high. The stock exchanges in the United States were closed for the holiday on Monday. Nasdaq 100 futures fell nearly 3% before trading 2.1 percent lower, while Dow Jones futures fell 1.2 percent.
Global stocks have also fallen as Western censure intensifies in response to Russian President Vladimir Putin’s recognition of two self-proclaimed republics in eastern Ukraine and orders for Russian soldiers to enter the region. It comes after weeks of warnings from the US and its allies that Putin may be contemplating an invasion of Ukraine, which he has rejected.
In a note, Chris Weston, Melbourne-based head of research at Pepperstone Financial Pty, wrote, “It’s a fluid position in the shifting geopolitical narrative we see before us.” “Traders are currently playing defence as weaker liquidity, owing to the Presidents Day vacation in the United States, exacerbates swings.”
President Joe Biden signed an executive order restricting US investment, commerce, and funding in Ukraine’s separatist regions, and a senior administration official said more actions, including economic sanctions, will be announced on Tuesday.
“The West will condemn the action and impose sanctions,” said Keith Temperton, a trader with Forte Securities. “How far these sanctions go will decide results.” “In my opinion, the sanctions will be less severe than the market anticipates.
Russian assets fell as well, with the benchmark MOEX stock index falling more than 9% on Monday, the largest drop since the annexation of Crimea in March 2014. The Stoxx 600 Index in Europe was down 1% and approaching correction territory, with automakers and banks leading the way. Energy equities were the only ones to gain ground in early trading.