Stocks accelerate losses as risk aversion grips markets over Russia-Ukraine fears

The broader market mood quickly shifted in European morning trade on 19 November, as investors began fleeing the FTSE 100 and wider European stock markets for safe haven assets amid fears of a fresh escalation in Russia’s war in Ukraine.

Equities were selling off while bonds were being bid as yields stumble lower. 10-year Treasury yields are now down 6 bps to 4.35% with 10-year German bund yields down 8 bps to 2.28%, poised for its biggest daily drop since June.

S&P 500 futures are now down 0.6% with the DAX and CAC 40 also both down by over 1%.

In FX, the clearest hint is there being bids in both the Japanese yen and Swiss franc. Of note, EUR/CHF is now down 0.5% to 0.9315 and closing in on a test of key support near 0.9300 again.

Markets have been spooked by Vladimir Putin’s move to approve an updated Russian nuclear doctrine, which could pave the way for the Kremlin to consider using nuclear weapons if it is subject to a missile attack supported by a nuclear power.

While the doctrine has reportedly been in the works for some months, the decision to finalise the plans followed the first attack on Russian territory by Ukraine with US-made missiles.

The developments have triggered a flight toward assets like gold and sparked falls across global markets.

Gold, typically seen as a haven for investors amid times of volatility, climbed to a two-week high of £2,085 per ounce.

“News of Ukraine utilising its new ability to hit Russia with US missiles has prompted a sharp turn lower for stocks, while the dollar and gold have both risen on safe haven buying,” said Chris Beauchamp, chief market analyst at online trading platform IG.

“While likely more sabre rattling from the Kremlin, it does take the world closer to a terrifying miscalculation.

“Gains in indices have been wiped out, and investors are once again turning cautious on fears of further escalation” he added.

Andrea Tueni, head of sales trading at Saxo Banque France, told Bloomberg the market reaction is “logical” after days of tension.

“For the moment the market reaction is contained, some are still in a wait-and see-mode,” he added.