U.S. stocks slid, oil prices jumped and Russian authorities scrambled to keep a grip on domestic markets, as investors rushed to adjust to geopolitical developments including new sanctions against Russia.
The S&P 500 index dropped 1.3% in early Monday trading, while the tech-heavy Nasdaq Composite Index declined 0.8%. The Dow Jones Industrial Average fell more than 500 points, or 1.5%.
The losses were broad-based, with 10 out of 11 of the S&P 500’s groups falling. Only energy stocks notched a gain.
Moscow’s invasion has heightened the turbulence in financial markets, as investors shift bets on the situation in Europe and how it might affect plans by the Federal Reserve to raise interest rates. The S&P 500 last week fell into a correction when it closed down more than 10% from its January record. Stocks went on to rally later in the week.
Monday’s declines have helped push the S&P 500 and Nasdaq toward a second consecutive month of losses. They’re both on track for the biggest two-month percentage decline since March 2020.
The pan-continental Stoxx Europe 600 fell 1.1%, approaching a correction. Russia’s central bank said Monday that the Moscow Exchange wouldn’t open for stock trading,Russia’s central bank opted for an emergency interest-rate hike to combat a collapse in the ruble, more than doubling its benchmark rate to 20%, hours after imposing other restrictions on markets. It also temporarily banned brokers from handling sales of securities by nonresidents and said it would keep the Moscow Stock Exchange closed Monday.
The Russian ruble plunged to a record low, trading at 119 rubles to $1 in the European morning before recovering moderately to around 97 rubles to $1. It had briefly rebounded after the rate increase. Market-data services showed limited price updates Monday, suggesting few transactions were taking place.
“There is very little liquidity and consequently you get this gapping in the price and you’re not getting any real reflection of where the ruble would be,” said Jane Foley, head of foreign-exchange strategy at Rabobank.
London-listed shares of Russian companies plunged, with Sberbank, the country’s largest lender, down around 69%. Gazprom fell 37% and Rosneft lost 28% in recent trading.
“There’s an enormous amount of volatility and nervousness,” said Fahad Kamal, chief investment officer at Kleinwort Hambros. “The risk of miscalculation or something getting out of hand has increased.”
Oil prices rebounded, with most actively traded futures for Brent crude, the global oil benchmark, rising 3.5% to $97.39 a barrel. Brent for delivery in April climbed to $100.62.
Brent prices last week surged to about $100 a barrel for the first time since 2014 as investors calculated how the invasion could snarl the movement of resources in the region. Prices fell late in the week after initial sanctions on Russia stopped short of what many traders considered the most severe measures that would slash supply.
Over the weekend the U.S., European Union, Canada and the U.K. said they intended to cut off some Russian banks from the Swift network, a global payment system that connects international banks and facilitates cross-border financial transfers. The countries also said they would act to stop Russia’s central bank from deploying its more than $600 billion in reserves to aid the Russian economy.
Meanwhile, President Vladimir Putin ordered Russia’s nuclear-deterrence forces to be put on alert. The move would put Russia’s network of nuclear missiles into a state in which it could be used if necessary.
In bond markets, the yield on the benchmark 10-year U.S. Treasury note fell to 1.863%, from 1.984% Friday, as investors reached for the safety of government bonds. Yields fall as bond prices rise.
Russian sovereign debt sold off heavily, with the yield on a dollar-denominated note maturing in five years surging to 25%, from 9% Friday.
Gold prices rose, another indicator of rising risk aversion. Most actively traded gold futures rose 1.5% to about $1,915.75 a troy ounce, close to a 15-month high.
Bitcoin prices edged higher and hovered above $40,000 in recent trading.
Defense stocks rallied, with U.S.-based Northrop Grumman rising 6.8%, making it one of the best performers in the S&P 500. Shares of European companies with sizable operations in Russia extended losses Monday. U.S.-listed shares of Austrian bank Raiffeisen, which had over 20% of its workforce in Russia as of the end of 2021, tumbled more than 15% in recent trading.
European banks declined, with the Euro Stoxx banking subindex down around 7%. BNP Paribas fell 7.5%. Société Générale dropped around 11% and UniCredit slid around 12% recent trading.
“With Swift, there will be problems processing payments. That creates credit risk, not only for European banks with affiliates in Russia but more broadly, those with clients in Russia,” said Sebastien Galy, a macro strategist at Nordea Asset Management.
Currencies in the broader Eastern European region also came under pressure. The Polish zloty and the Hungarian forint depreciated around 2% against the dollar.
In Asia-Pacific, stock markets were mixed, with major benchmarks gaining or losing less than 1%.