Vladimir Putin flexes muscles over Ukraine, markets wither

Mar 04 2014, 05:08 IST
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SummaryGold & crude surge, equities plunge; rouble hits record low

Fears of armed conflict between Russia and Ukraine spooked global markets on Monday, dragging down stocks and driving up commodities to multi-month highs as concerns over supplies of some energy and farm items intensified.

The MSCI All-Country World Index lost 0.7% at 6 am in New York and the MSCI Emerging Markets Index dropped 1.3% in its biggest monthly fall.

Standard & Poor’s 500 Index futures tumbled 0.9% while European shares shed the most in a month with the Stoxx Europe 600 Index dropping 1.9%.

Russian stocks hit their lowest since 2009, losing 13% in a single session as Ukraine’s Eurobonds crashed to a record low.

However, the yen and treasuries gained while gold edged up to its loftiest in four months during intra-day trade on a surge in investor interest in safe haven assets.

At home, the Sensex ended 173.47 points, or 0.82%, lower to settle at 20,946.65 points, while the NSE’s Nifty ended 55.50 points, or 0.88%, lower at 6,221.45 points.

The rouble hit its all-time low of 42.6948 against the central bank’s target basket for the dollar and the euro, prompting Bank Rossii to raise its main interest rate the most since 1998, by 150 basis points, to prop up the currency.

However, the yen and the dollar gained.

The rupee, too, was affected by the crisis and ended weaker at 62.04/05 versus Friday’s 61.75/76. The benchmark 10-year bond yield closed up 4 basis points at 8.90%.

Any escalation of the crisis can potentially dampen strong dollar inflows into local stocks and debt, which totalled over $2 billion in February, and helped push the rupee to its highest in more than a month on Friday.

The Thomson Reuters-Jefferies CRB index, which tracks the price movement of 19 commodities, hit its highest since October 2012, having gained 1.1% to 306.07 by 7 pm. Among industrial and farm commodities, brent crude oil hit a two-month high, US crude rose to an over six-month peak in intra-day trade, wheat jumped to a two-and-half-month high and corn scaled the peak in six months.

India doesn't face much of a threat from impending Russian invasion of its western neighbour as it has adequate domestic grains, although any spike in brent crude oil and fertiliser prices could hurt. The country imports more than 70% of its crude oil and 20-25% of its urea needs and could face a spill-over effect of any rise in global

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