Russian sanctions ripple in world markets, the ruble tanks

LONDON (Reuters) – Global stocks tumbled, oil prices jumped and the ruble fell to new record lows on Monday as the West ramped up sanctions against Russia over its attack on Ukraine, which included blocking banks from the SWIFT global payments system.

Russia’s central bank raised its key interest rate to 20% from 9.5% in an emergency move, and authorities told export-focused companies to be prepared to sell foreign currency as the ruble plunged nearly 30% to record lows against the dollar. Read more

With an economic crisis approaching in Russia, the fallout from the strictest sanctions imposed by the West over the weekend spread to financial markets.

European stocks (.stoxx) 2% decline. European banks with the most exposure to Russia, including Austria’s Raiffeisen Bank (RBIV.VI)UniCredit (CRDI.MI) and Societe Generale (SOGN.PA)between 9 and 15%, while the index of banks in the broader euro area fell (.SX7E) fell 7%.

US stock futures were deep in negative territory, despite MSCI’s broad gauge of Asian stocks (.MIAP00000PUS.) Japan’s Nikkei index made small gains (.N225).

“The trading environment is very dynamic, and we maintain a defensive stance as things can go a lot worse from here,” said Peter Garnery, head of equity strategy at Saxo Bank.

Meanwhile, oil prices rose after Russian President Vladimir Putin put the nuclear armed forces on high alert on Sunday, the fourth day of the biggest attack on a European country since World War II. Read more

The escalation of tensions heightened fears of disruption to oil supplies from the world’s second-largest producer, sending Brent crude futures up 5% to $102.86. US West Texas Intermediate crude futures rose $4.62, or nearly 5.0%, to $96.24 a barrel.

“I tell clients that all we know for sure is that energy prices will be higher, and there will be some beneficiaries,” said John Milroy, financial advisor at Ord Minute in Sydney.

“It’s an old cliché, but it’s true that uncertainty leads to moves in both directions.” Read more

Safe brilliance

With uncertainty still gripping the markets, investors sought to lock in the dollar, Swiss franc and Japanese yen.

The euro fell 1% to $1.1168 and 0.9% to 129.08 yen, while the risk-sensitive Australian and New Zealand dollars fell 0.5% and 0.3%, respectively.

Demand remained strong for sovereign bonds such as US Treasuries and German bonds – considered among the safest assets to hold globally.

The US 10-year Treasury yield fell about 7 basis points to 1.90% in London trade, and the German equivalent yield fell 6 basis points to 0.16%.

Money markets have continued to push back rate hike expectations, with investors now pricing in nearly 30 basis points of tightening from the European Central Bank in total this year, down from 35 basis points late last week.

Gold was last up 0.61% to around $1,899.

The Russian ruble fell nearly 30% to a record low of 120 against the dollar, but regained some of its gains to keep its recent trading at just over 100 against the dollar.

MSCI Russia’s stock index fell 25% (.MIRU00000PUS)while Russian exchange-traded funds (ETFs) in London and Frankfurt fell by more than 35%. (XMRC.DE)And the (CSRU.L)And the (HRUB.L) As investors dumped Russian assets.

Reporting by Dara Ranasinghe. Additional reporting by Kevin Buckland in Tokyo. Editing by Jason Neely

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