Fear of Ukraine, Russia war sends shockwaves through global markets
Stocks tumble in Europe and Asia; official says ‘hysteria’ on Russian markets will subside
Fears of a war between Ukraine and Russia on Monday sent shockwaves through global stock markets, with shares tumbling across Europe and Asia.
London’s FTSE 100 index, Tokyo’s Nikkei 225 and France’s CAC 40 indices were all down by more than 1 percent at 1pm GMT, after it emerged Sunday that Ukraine had mobilized for war and Russia’s President Vladimir Putin said he had the right to invade his neighbor.
Banking stocks were among the worst performers in Europe, due to concerns about some lenders’ exposure to the region, Reuters reported. Austria’s Raiffeisen slumped 6.4 percent while France’s Societe Generale fell 4.6 percent.
Russia’s MICEX index tumbled 10 percent to 1,294 points at the opening of exchange trading on Monday, while the Russian central bank raised its key lending rate 1.5 percentage points after the rouble fell 2.5 percent to an all-time low against the dollar.
A senior official in Russia said the “hysteria” on the local markets would subside due to Central Bank interventions to support the rouble.
But Deputy Economy Minister Andrei Klepach told Reuters that Russia faces a period of strained ties with the European Union and the United States which will weigh on the economy.
“The wave of hysteria will pass, but it is difficult to say when,” Klepach said. “Anyway, what lies ahead of us is a period of more confrontation and difficulties. For us, that will mean more complicated relations with the European Union, the States, with all the resulting consequences.”
British Foreign Secretary William Hague warned that the turmoil in Ukraine represents the “biggest crisis” to face Europe this century, warning of “significant costs” if Russian troops did not withdraw from Ukraine’s Crimea territory.
Despite the gravity of the situation and reaction of the markets, some traders said they expect a speedy resolution to the crisis.
“It’s going to be scary for a week or two but from a geopolitical and economic point of view, I expect it will have blown over in a few weeks,” Andreas Clenow, hedge fund trader and principal at Zurich-based ACIES Asset Management, told Reuters.
Meanwhile, an International Monetary Fund (IMF) mission is set to start consultations in Ukraine on Tuesday, Reuters reported quoting an unnamed official at the central bank. The country says it needs about $35 billion in financial assistance over the next two years to avoid bankruptcy.