As tensions surrounding Ukraine continue to heat up, global stock markets started the week on a negative footing, with European stocks clumping over 2% after Western countries imposed tough sanctions on Russia following its invasion of Ukraine. The new restrictions include blocking big Russian banks from the SWIFT global payments system, pressuring financial stocks both in Europe and in Russia.
Of note, Russia's central bank said that the Moscow Exchange wouldn't open for stock trading today. Derivatives markets would remain closed as well. Adding to a downbeat tone globally, Russian President Vladimir Putin put nuclear-armed forces on high alert on Sunday. Putin called the West an 'empire of lies' after the latest sanctions on Russia and closed airspace to flights from 27 countries. Meanwhile, the Russian central bank said they have a system that can replace SWIFT internally.
Against this backdrop, US stock index futures lost more than 1% as market players continue to monitor developments surrounding Ukraine. On this front, the Ukrainian delegation at talks in Belarus has demanded the retreat of all Russian forces from its territory, including Donbas. As this doesn't sound like a negotiating position, any relief rally shouldn’t be expected in the financial markets in the immediate term, and risk aversion could persist during the North American session as well.
As such, the safe-haven dollar is modestly higher after a nervous opening, with most currencies trying to close their opening gaps lower. EURUSD has settled below 1.1200 after a bounce from the 1.1120 region earlier in the day. The pair continues to trade with solid intraday losses as traders assess the consequences of the latest Western sanctions against Moscow. The common currency is also pressured by an emergent consensus view that ECB tightening will now be substantially delayed.
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