(Bloomberg) — Stocks and equity futures fell Friday and havens including sovereign bonds rose after a fire broke out at major nuclear power plant in Ukraine following shelling by Russian troops.
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An initial spasm of worry lopped 3% off European equity futures but the panic eased a little as investors weighed the incident. European contracts pared the drop to about 2%, while those for the U.S. shed less than 1%.
Gains in gold and the dollar moderated, while the euro pared a decline. Oil was near $110 a barrel, trimming a jump of as much as 4.8%. Asian equities remained in the red, sapped by Chinese technology stocks.
Treasuries rallied, with the 10-year yield falling below 1.80%. The gap between two-year and 10-year yields is the lowest since March 2020. The flatter curve points to expectations for slowing economic expansion.
The nuclear plant, Europe’s largest, suffered a fire as Russian troops began shelling the facility Friday, Ukrainian officials said. There were calls for Russia’s military to allow a security zone to be established.
Sentiment was already shaky after Russia’s invasion of its neighbor and transformation into a pariah in the global economy. Energy, metal and grain costs have soared as Russia’s oil and other resources are shunned.
“The headlines about the Russian shelling of that nuclear plant are clearly driving a flight to quality trade,” said Chamath de Silva, senior portfolio manager at BetaShares Holdings in Sydney. “It’s classic risk off right now.”
Russia’s military action and sanctions imposed by the U.S. and its allies are creating a range of risks. They include high raw material costs, damage to global confidence that can sap investment and the potential for credit stress to ripple through markets.
“Rising commodity prices are a big concern for the market, prompting fears of stagflation,” said Fiona Cincotta, senior financial markets analyst at City Index. “The economic clinch point of this war is commodity prices. Higher energy prices, slowing growth, and surging inflation are not a good outlook.”
Traders are also evaluating the monetary policy outlook and awaiting the key monthly U.S. employment report.
Chair Jerome Powell on Thursday reaffirmed that the Federal Reserve is set to start a series of interest-rate hikes to curb inflation, while indicating it will move judiciously and is alert to inflation risks.
What to watch this week:
Some of the main moves in markets:
Stocks
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S&P 500 futures fell 0.7% as of 11:24 a.m. in Tokyo. The S&P 500 fell 0.5%
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Nasdaq 100 futures slid 0.9%. The Nasdaq 100 fell 1.5%
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Japan’s Topix index fell 1.5%
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South Korea’s Kospi index lost 1.1%
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Australia’s S&P/ASX 200 index dropped 0.9%
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Hong Kong’s Hang Seng index fell 2.2%
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China’s Shanghai Composite index shed 0.5%
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Euro Stoxx 50 futures decreased 1.7%
Currencies
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The Bloomberg Dollar Spot Index rose 0.1%
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The euro was at $1.1036, down 0.3%
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The Japanese yen was at 115.44 per dollar
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The offshore yuan was at 6.3246 per dollar
Bonds
Commodities
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West Texas Intermediate crude rose 2.2% to $110.03 a barrel
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Gold was at $1,937.51 an ounce, up 0.1%
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