Global equity markets retreated yesterday on news that Ukraine forces had engaged a Russian armoured column on Ukrainian soil overnight, while yields on benchmark German bunds plumbed record lows below one per cent.
Ukraine said its forces had attacked and partly destroyed the Russian column, a firefight that would mark a dramatic worsening of the conflict if confirmed.
Investors have worried about a deepening stand-off between Ukraine and Russia, though recent signs of easing tensions had lifted equity markets, especially in Europe.
Any sustained upturn in violence could lead to a setback
“It is hard to know how serious this is, but any sustained upturn in violence could lead to a short-term setback,” said Jim McDonald, chief investment strategist at Chicago-based Northern Trust Asset Management.
Despite the decline in equities, leading US stock indexes remained on track for a second straight week of gains, and the benchmark S&P 500 is less than two per cent from a record closing high set in July.
MSCI’s all-country world equity index fell 0.19 per cent, while the FTSEurofirst 300 index of leading European shares fell 0.45 per cent to close at 1,323.10, after trading 0.8 per cent higher earlier in the session.
Stocks also retreated on Wall Street. The Dow Jones industrial average fell 72.73 points, or 0.44 per cent, to 16,640.85.
The Standard & Poor’s 500 Index was down 4.44 points, or 0.23 percent, to 1,950.74. The Nasdaq Composite Index was down 5.70 points, or 0.13 per cent, to 4,447.30.
The safe-haven yen and Swiss franc advanced after news of the Ukraine event. The Swiss franc hit a 19-month high against the euro and a three-week peak versus the dollar. The yen reversed losses against the dollar, turning higher.
The dollar was down 0.2 per cent against the yen at 102.22 yen, after hitting its highest in more than a week.
The dollar last traded at 0.9029 Swiss franc, down 0.4 per cent. The euro, meanwhile, tumbled versus the franc to its lowest since January 2013. It was last at 1.2098, down 0.1 per cent.
Yields on German 10-year bunds fell to a record low of 0.952, according to Tradeweb pricings.
Ten-year UK bond yields fell to 2.359 per cent, the lowest since August 2013, while US Treasury 10-year yields fell to 2.3327 per cent. Crude oil prices rose on the Ukraine news, after Brent had stabilised close to a 13-month low on ample supplies of high-quality oil and signs that faltering global economic growth may cap fuel demand.
October Brent crude rose $1.22 to $103.29 a barrel, while US crude rose $1.15 to $96.73.