Wall Street stocks drop as Biden says Russia could invade Ukraine within ‘several days’

Wall Street and European stocks fell sharply and Treasuries rallied on Thursday, as US president Joe Biden said Russia was on the brink of invading Ukraine within “several days”.

The S&P 500 share index fell 1.2 per cent, with the technology-focused Nasdaq Composite losing 1.4 per cent. The Stoxx Europe 600, which had been supported earlier in the day by strong earnings from consumer goods group Reckitt and Gucci parent Kering, fell 0.7 per cent.

Russia’s Moex share index dropped 3.7 per cent, while the rouble lost 1.4 per cent against the dollar.

Financial markets have whipsawed over the past week, as developments in Ukraine added to nerves already frayed by surging inflation and central banks’ tightening monetary policy. Biden has said the US and its allies would respond forcefully to any attack on Ukraine with economic sanctions against Russia, one of the world’s largest oil producers, which also has rich reserves of metals that are crucial to global supply chains.

“The [stock] market was under pressure already, with geopolitical tensions now adding to that,” said Hani Redha, global multi-asset manager at PineBridge Investments. “It was already raining and now it’s pouring.”

The S&P 500 has dropped more than 7 per cent so far this year.

Speaking at the White House on Thursday, Biden said there was a “very high risk” of a Russian invasion. He said the US believed Moscow was engaged in “a false flag operation to have an excuse to go in”.

Highly rated government debt rallied as investors sheltered in haven assets. The yield on the 10-year US Treasury note fell 0.07 percentage points to 1.98 per cent, reflecting a significant rise in the price of the benchmark security. The equivalent UK gilt yield dropped 0.07 percentage points to 1.46 per cent.

The price of gold rose 1.4 per cent to $1,895 a troy ounce.

Kyiv and Moscow had earlier blamed each other for clashes in Ukraine’s eastern Donbas region. The Ukrainian army said “Russian occupation forces” had shelled more than 20 separate locations. Russia blamed Ukraine for the escalation.

In a tweet on Thursday morning, Linda Thomas-Greenfield, US ambassador to the UN, said that “the evidence on the ground is that Russia is moving toward an imminent invasion”.

“Everything is unconfirmed and we’re at an impasse until we get more confirmation,” said César Pérez Ruiz, chief investment officer at Pictet Wealth Management. “It’s natural to take a bit of profit at this point.”

He added: “Markets are already nervous about the [Fed] moving too quickly [with interest rate rises] and killing the economic cycle.”

Money markets have priced in more than six quarter-point rate rises by the Fed this year after US inflation surged to a four-decade high in January.

Minutes from the Fed’s policy meeting on Wednesday highlighted its officials’ determination to combat stubbornly high inflation, although some warned about the risks posed to markets and the wider economy by tightening policy too quickly.

Oil markets remained choppy. Brent crude, the international benchmark, fell 1.9 per cent to $92.94 a barrel, having fluctuated during the week in response to speculation about how potential western sanctions on Russia would disrupt global fuel supplies.

In Asia, Japan’s Topix fell 0.8 per cent. Hong Kong’s Hang Seng trimmed losses from earlier in the day to close 0.3 per cent higher.