(Bloomberg) – Stocks and equity futures sank on Friday and safe havens, including sovereign bonds, surged on reports that a major nuclear power plant is on fire in Ukraine after Russian troops bombed it .
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Japan led losses in an Asian stock gauge, S&P 500 and Nasdaq 100 futures lost more than 1% and European contracts fell about 3%. Treasuries rallied, with the 10-year yield falling below 1.80%. Gold and the dollar rose. Oil soared.
Russian forces are firing on the Zaporizhzhia nuclear power plant and a fire has broken out, Ukrainian Foreign Minister Dmytro Kuleba said. The euro retreated.
Sentiment was already fragile after Russia invaded its neighbor and turned it into a pariah in the global economy. Costs of energy, metals and grain have soared as oil and other resources from Russia are shunned.
Russia’s military action and the sanctions imposed by the United States and its allies create a series of risks. They include high commodity costs, damage to global confidence that can undermine investment, and the potential for credit stress to spill over into markets.
“The headlines about the Russian bombing of this nuclear plant are clearly driving a flight to quality trading,” said Chamath de Silva, senior portfolio manager at BetaShares Holdings in Sydney. “It’s a classic risk right now.”
President Vladimir Putin has told Frenchman Emmanuel Macron that he plans to achieve the goals of his invasion, including overthrowing the government in Kiev. The United States has tightened sanctions, targeting eight wealthy Russians and their families. S&P Global Ratings downgraded Russia’s credit rating for the second time in a week.
Traders also assess the outlook for monetary policy. Chairman Jerome Powell reaffirmed that the Federal Reserve was preparing to begin a series of interest rate hikes to curb inflation, while indicating that it would act wisely.
Powell, in testimony before lawmakers on Thursday, said the Russian attack posed risks to inflation and growth. He again backed a quarter-point Fed rate hike later this month. He said “we are ready to increase more than that” in one or more meetings if inflation does not come down.
“Rising commodity prices are a big concern for the market, sparking fears of stagflation,” said Fiona Cincotta, senior financial markets analyst at City Index. “The economic decisive point of this war is the price of raw materials. Rising energy prices, slowing growth and soaring inflation are not good prospects.
According to the latest US data, the services sector has moderated and unemployment insurance claims have fallen more than expected. Traders await the key monthly employment report.
What to watch this week:
Some of the major movements in the markets:
S&P 500 futures fell 1.4% at 10:03 a.m. in Tokyo. The S&P 500 fell 0.5%
Nasdaq 100 futures slid 1.6%. The Nasdaq 100 fell 1.5%
Japan’s Topix index fell 1.9%
South Korea’s Kospi index lost 1.5%
Australia’s S&P/ASX 200 index fell 1.6%
The Bloomberg Dollar Spot Index rose 0.2%
The euro was at $1.1023, down 0.4%
The Japanese yen was at 115.43 to the dollar
The offshore yuan was at 6.3238 to the dollar
West Texas Intermediate crude rose 3.1% to $111.07 a barrel
Gold was at $1,942.86 an ounce, up 0.4%
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