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Markets tumble amid growing fear of Russian invasion

Markets tumble amid growing fear of Russian invasion
 

Global markets crashed today as warnings about a possible Russian invasion of Ukraine intensified.

The FTSE fell 2 per cent, the Euro Stoxx 50 was down 2.6 per cent and the Dax dropped 2.4 per cent in trading today (February 14).

In the US, the S&P opened 0.56 per cent down, and the Dow Jones was down 0.98 per cent.

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As equity markets tumbled, investors flocked to safe havens, with government bond yields dropping.

US 10-year treasury bond yields were down 0.88 per cent to 1.94 per cent, and UK 10-year gilt yields were down 0.24 per cent to 1.55 per cent.

The market wobbles came after the US national security adviser Jake Sullivan warned that Russia could launch an invasion of Ukraine as early as this week.

“We are in the window when an invasion could begin at any time,” he told a press briefing on Friday (February 11).

A number of countries then instructed their citizens to leave Ukraine, including the UK and US.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown said just as the storm of Covid appeared to be receding, the growing expectation of an invasion is now the “fresh threat” unnerving investors.

Hargreaves Lansdown’s investor confidence index, which surveys the firm’s clients on a monthly basis, showed a 6 per cent drop in confidence in global sectors between January and February this month.

She said the prospect of an invasion has put energy markets on edge due to the possibility of high energy prices should supplies be threatened.

“The possibility Russia troops could move across the border has led to another surge in the oil price to above $95 (£70.3) a barrel, edging up towards $96 (£71), a level brent crude has not been at since 2014. 

“As consumers brace themselves for more financial pain to hit as household bills shoot up and retailers are forced to pass on higher commodity, transport and labour costs through the price of goods and services, investors are doubly spooked by the prospect of war breaking out in Europe."

However, Rupert Thompson, chief investment officer at Kingswood said it is far from clear how long any Ukraine-related market decline will last.

In the past, losses caused by geo-political conflicts have not been great or sustained for that long, they have been relatively contained, he said.

“That said, there is clearly a tail-risk that any such event spirals into a wider confrontation, inflicting more material and long-lasting damage on markets.”

Aziz Alnaim, lead portfolio manager of the Mayar Responsible Global Equity Fund, said investment professionals should leave the "whys" to the academics of international relations and focus on navigating global events in the best interests of clients.

It is important to remember that the best course of action throughout all the crises that have pockmarked the last 200 years is to have bought equities and held them for the long term, he said.