(Bloomberg) — Stocks fell, with European equities shedding almost 1%, and global bonds climbed on worries over the latest escalation in Russia’s war against Ukraine.
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S&P 500 futures dipped 0.3%. The yield on 10-year Treasuries fell four basis points to 4.37%. The moves were steeper in Europe, with German bond yields dropping to the lowest since October. The euro retreated 0.3%. Poland’s main stock index sank more than 3%.
Markets were rattled by reports that Ukrainian forces reportedly carried out their first strike on a border region in Russia using Western-supplied missiles. Earlier, President Vladimir Putin had approved an updated nuclear doctrine that expanded the conditions for Russia to use atomic weapons, including in response to a massive conventional attack on its soil. Putin had pledged in September to revise the doctrine.
“The market reaction is logical, one could feel already yesterday that the tension was rising,” said Andrea Tueni, head of sales trading at Saxo Banque France. “For the moment the market reaction is contained, some are still in a wait-and see-mode.”
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Traditional haven assets including the Japanese yen, Swiss franc and gold gained. Ukraine’s sovereign dollar bonds fell the most among emerging-market peers, with a note due February 2029 losing 1.6 cent on the dollar.
In commodities, natural-gas futures gained as much as 1.1%, trading near their highest levels in a year. Gold was up 0.9% at $2,635 an ounce. Oil traders, meanwhile, appeared unfazed by the latest developments, with prices falling after Europe’s largest oil field gradually restarted following a power outage.
Trump Picks
Also on Tuesday, traders were discussing how Trump’s nomination of Treasury secretary could shape policy. The transition team is considering pairing Kevin Warsh, a former Federal Reserve official, in the Treasury secretary role, with hedge fund manager Scott Bessent as director of the White House’s National Economic Council, according to people familiar with the matter.
“Kevin Warsh was in the FOMC, so the likelihood of political interference into the Fed policy making is certainly diminishing if he were to become the Treasury secretary,” said Gero Jung, chief economist of Mirabaud Asset Management in Geneva.
