Stocks Slide as Havens Sought on Crimea; Oil, Gold ClimbStephen Kirkland and Callie Bost
Stocks slid, with an index of global equities tumbling the most in a month, while the ruble weakened to an all-time low as Russia’s growing military presence in Ukraine prompted an emerging-market selloff. The yen, U.S. Treasuries and gold rose as investors sought havens.
The MSCI All-Country World Index fell 1.2 percent by 4:44 p.m. in New York. Russian stocks slumped the most in five years and Ukrainian debt dropped the most on record as the ruble retreated more than 1 percent versus its dollar-euro basket. The Standard & Poor’s 500 Index lost 0.7 percent as the VIX volatility gauge jumped. Gold rose 2.2 percent as Brent crude gained as much as 3 percent, while wheat climbed the most since 2012. Ten-year Treasury yields declined to a one-month low.
U.S. Secretary of State John Kerry is traveling to Ukraine and the United Nations Security Council is set to meet as western leaders seek to respond to Russia seizing control of the country’s Crimea region. Ukraine said Russia’s navy ordered two of its ships to surrender. Russia’s central bank unexpectedly raised its key interest rate by 150 basis points. Manufacturing gauges in China signaled slower growth, while U.S. data showed faster-than-estimated factory expansion.
“Ukraine is troubling, but it will be short-term,” Karyn Cavanaugh, a market strategist at ING U.S. Investment Management in New York, said in a phone interview. Her firm oversees about $200 billion. “If we do see some market gyrations and volatility, it could be a buying opportunity. I think that things are going to be coming along that will cause the market to look past it.”
Kerry’s trip to Kiev, Ukraine’s capital and scene of a bloody uprising that precipitated the current crisis, comes after the leaders of the Group of Seven nations condemned Russia’s actions as a clear violation of the former Soviet republic’s territorial integrity. Ukraine was set to become the third-biggest corn shipper this year, and ranks sixth for global wheat exports.
Moscow’s Micex stock index dropped 11 percent in its biggest plunge since November 2008. OAO Gazprom, which supplies natural gas to Europe via Ukraine, dropped 13 percent in Moscow, its biggest decline on a closing basis since November 2008.
The ruble weakened 1.4 percent to a record-low 42.6334 against the dollar-euro basket used by the central bank to manage the currency. It slid more than 0.6 percent versus all 16 major peers tracked by Bloomberg as traders estimated the regulator sold about $10 billion of foreign currency to stem the decline.
The Russian Volatility Index, which reflects the average value of implied volatility of options on futures for Russia’s RTS Index, jumped a record 149 percent to an almost five-year high of 74.46.
Bank Rossii raised its one-week auction rate to 7 percent from 5.5 percent, saying it was a temporary increase aimed at stemming inflation and ensuring financial stability. The cost of insuring Russia’s debt against non-payment rose to the highest level since June, with credit-default swap contracts on Russian government bonds surging 46.5 basis points to 235.5 basis points, according to prices compiled by CMA.
Yields on Ukraine’s dollar-denominated Eurobonds due in 2023 jumped 1.11 percentage points, or 111 basis points, to 10.56 percent. It costs $2.36 million in advance and $500,000 annually to protect $10 million of Ukraine’s debt for five years, according to CMA. That’s up from $1.9 million in advance and signals a 54 percent probability of default during the period, the data show.
Ukraine yesterday mobilized its army after lawmakers in Moscow gave permission for troop deployments. The government is seeking as much as $35 billion in aid led by the International Monetary Fund to replenish its reserves.
The Ukrainian Equities Index slid 12 percent as benchmark gauges in Poland and Hungary dropped more than 3.5 percent. The MSCI Emerging Markets Index sank 1.7 percent, the most since January.
The Hang Seng China Enterprises Index of mainland Chinese stocks listed in Hong Kong slid 1.4 percent while the Shanghai Composite Index rose 0.9 percent. China’s Purchasing Managers’ Index for February came in at 50.2, according to official data released March 1. That compares with a January level of 50.5. A private PMI by HSBC Holdings Plc and Markit Economics signaled contraction, slipping to 48.5 from 49.5.
U.S. stocks retreated after the S&P 500 gained 4.3 percent last month, the most since October, to a record. Options tied to gains in the benchmark gauge for American stock volatility reached the highest prices in six years last week, reflecting bets that the calm prevailing in equities for the past year won’t last. The Chicago Board Options Exchange Volatility Index, known as the VIX, advanced 14 percent to 16 for its biggest jump in a month.
General Electric Co. and 3M Co. plunged at least 1.3 percent to pace declines among large industrial shares. The Market Vectors Russia ETF tracking companies from Gazprom to OAO Lukoil dropped 6.9 percent, the most in more than two years. Yandex NV, a U.S.-listed online search engine operating in Russia, slumped a record 14 percent. Newmont Mining Corp., the largest U.S. gold producer, climbed 1.6 percent.
The Institute for Supply Management’s index of U.S. manufacturing rose to 53.2 in February from 51.3 a month earlier, data today showed. Readings above 50 signal expansion. The median projection of 81 economists surveyed by Bloomberg was 52.3, with estimates ranging from 49.5 to 55. Manufacturing accounts for about 12 percent of the U.S. economy. The ISM’s factory gauge averaged 53.9 for all of last year.
The Stoxx Europe 600 Index lost 2.3 percent after jumping 4.8 percent in February, the most since July. A total of 575 stocks out of the 600 in the gauge fell today, with trading on the index 19 percent greater than the 30-day average, according to data compiled by Bloomberg. The VStoxx Index, which measures the cost of Euro Stoxx 50 Index options, jumped 30 percent, the most since 2011.
Danish brewer Carlsberg A/S fell 5.3 percent and Metro AG, Germany’s largest retailer, declined 5.4 percent. Eastern Europe including Russia accounted for more than 25 percent of last year’s revenue for both companies. Nokian Renkaat Oyj, a Nordic tiremaker, lost 6.6 percent. Russia and the Commonwealth of Independent States made up almost 35 percent of its revenue in 2012, data compiled by Bloomberg show.
Randgold Resources Ltd. climbed 4.3 percent as gold rallied. Roche Holding AG lost 4.6 percent after it was advised to end a trial of a lung cancer drug. Bouygues SA slipped 1.8 percent after a report that the construction and telecommunications company is planning a bid for Vivendi SA’s phone carrier SFR.
Brent crude rose as much as 3 percent to $112.39 a barrel, the highest price this year. West Texas Intermediate crude increased 2.3 percent to $104.92 a barrel in New York after earlier topping $105 a barrel for the first time since September. Russia is the world’s largest energy exporter.
Gold futures advanced to the highest level in more than four months, settling at $1,350.30 an ounce on the Comex in New York. Silver futures added 1.1 percent.
The S&P GSCI Spot Index of raw materials jumped 1.6 percent, the most since August, amid concern energy and agricultural supplies will be disrupted by a potential conflict between Russia and Ukraine. Wheat gained 4.9 percent, the most since June 2012, while corn added 1.5 percent.
The yen climbed 0.4 percent to 101.42 per dollar after reaching 101.20, the strongest level since Feb. 5. It jumped 0.9 percent to 139.29 per euro. The 18-nation shared currency slipped 0.5 percent to $1.3734 as it weakened against 10 of 16 major peers.
U.S. 10-year Treasury yields declined four basis points to 2.61 percent. Rates touched 2.59 percent, the lowest level since Feb. 4. Germany’s 10-year bond yields slid seven basis points to 1.55 percent, near the lowest level since July.