NEW YORK (Reuters) – Gold prices jumped to an eight-month high and safe-haven debt rose on Thursday after U.S. President Joe Biden said there was every indication Russia planned to attack Ukraine, while Moscow accused Washington of ignoring its security demands.
A gauge of global equities fell more than 1% despite strong corporate earnings in Europe as the Ukraine standoff deepened. Russian-backed separatists and Ukrainian forces accused each other of firing shells across a cease-fire line and Britain, as well as the United States, said Russia sought to fabricate a pretext to invade.
U.S. Secretary of State Antony Blinken told the United Nations Security Council that Russia was preparing to attack its neighbor in the “coming days.” Russian Deputy Foreign Minister Sergei Vershinin called the comments regrettable and dangerous.
U.S. and German government bond yields fell and oil slid as talks to resurrect a nuclear deal with Iran entered their final stages, which could boost crude supplies. Losses were capped by the tension between the West and Russia, a top energy exporter.
A sell-off on Wall Street increased late in the session as the weekend approached with the Ukraine crisis unsettled, said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.
“The continued weakness, especially in the growth names, is indicative of elevated nervousness and sellers continuing to swamp buyers in just about every stock,” James said.
Marc Chandler, chief market strategist at Bannockburn Global Forex, said due to a U.S. holiday on Monday the weekend was long and added to the heightened uncertainty in the market.
“You as a market participant are not incentivized to be fighting the risk-off mood ahead of the weekend when anything can happen,” Chandler said.
The pan-European STOXX 600 index fell 0.69% while MSCI’s gauge of stocks across the globe closed down 1.49%.
On Wall Street, the Dow Jones Industrial Average fell 1.78%, the S&P 500 lost 2.12% and the growth-oriented Nasdaq Composite dropped 2.88%. The drop in the S&P500 and Nasdaq were their biggest single-day declines in two weeks.
Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares rose 0.15% rise as signs of a less aggressive Federal Reserve buoyed sentiment.
Worries that the Fed would embark on a super-hawkish interest rate-tightening campaign eased after minutes released on Thursday of its last policy meeting signaled a measured, even dovish stance by policymakers.
Investors bought government debt. Yields on the U.S. 10-year Treasury note dropped 7.5 basis points to 1.970%, while sliding 0.2 basis points to 0.229% on Germany’s 10-year government bond, the euro zone benchmark, as the Ukraine crisis and weaker-than-expected U.S. data weighed.
The number of Americans filing new claims for jobless benefits unexpectedly rose last week, while freezing weather depressed homebuilding in January.
The Ukraine crisis has unnerved investors who also must watch the Fed and efforts by other central banks to fight soaring global inflation.
“There’s a lot of confusion right now and everybody’s crystal ball is pretty cloudy,” said George Mateyo, chief investment officer at Key Private Bank, speaking of both of Ukraine and how the Fed might tighten monetary policy.
The U.S. economy has weathered COVID-19’s hit on the economy well, with GDP and corporate earnings at peak levels, which bodes well for the market, Mateyo said.
“It’s going to be a challenging year, but not a dire year,” Mateyo added. “Expect some volatility this year, but don’t abandon risk altogether, don’t get super defensive. There’s a lot of missed opportunities inside the market.”
Gold prices rose above $1,900 for the first time since June. U.S. gold futures settled 1.6% higher at $1,902 an ounce.
Graphic: Gold price – https://fingfx.thomsonreuters.com/gfx/mkt/lbvgnwaekpq/gold%20price.PNG
Oil prices fell more than 2%. U.S. crude futures fell $1.90 to settle at $91.76 a barrel, and Brent settled down $1.84 to $92.97.
The dollar, also considered a safe haven, initially rose against most currencies but gains subsided and it later was marginally lower – suggesting investors were not yet panicking about the Russia-Ukraine tensions.
However the Japanese yen, a currency investors often buy as a safe-haven, hit its strongest since Feb. 7.
The dollar index fell 0.007% as the yen strengthened 0.48% at 114.91 per dollar.
The euro was down 0.11% to $1.1361.
Bitcoin fell 8.2% to $40,470.33 as risk appetite fell.
(Reporting by Herbert Lash, additional reporting by Tommy Wilkes in London, Kevin Buckland and Selena Li in Tokyo; Editing by Kim Coghill, Will Dunham, Kirsten Donovan, Barbara Lewis and Andrew Heavens)