Subtlety has never been Wall Street’s strong suit, and when a dose of sarcasm crept into the high-stakes discourse around tensions between Russia and Ukraine, it briefly proved more than traders could process.
Confusion reigned Monday afternoon, when media accounts of what appears to have been a tongue-in-cheek quip by Ukrainian leader Volodymyr Zelenskiy deriding assumptions about Russia’s military intent ignited a brief bout of ill-advised selling.
“It’s been a crazy day after a crazy week,” said Michael Purves, founder of Tallbacken Capital Advisors. “We are dealing with very twitchy markets. Geopolitical tensions come with lots of dramatic headlines.”
Hair-trigger swings have of course been a regular feature of markets this year. Investors have been struggling to price in a host of evolving catalysts, from the omicron variant to inflation and its impact on Federal Reserve policy and now European geopolitics. In the US, stocks staged several of the biggest intraday reversals in two decades last month.
The S&P 500 went on such a ride Monday shortly before 2 p.m. in New York. The index sank as much as 1.2% and oil spiked past $95 a barrel on reports that Zelenskiy said Russia would attack on February 16.
Mykhailo Podolyak, an adviser to Zelenskiy’s chief of staff, later said in a text message that the remarks should be interpreted as irony, and the country remained skeptical of “concrete dates” being cited for a potential invasion. Officials in Kyiv have said repeatedly they view the risk of a large-scale attack by Russia as unlikely.
Stocks pared back the losses, with the S&P 500 ending the session down 0.4%, while oil slid back below $95 a barrel. And the reaction wasn’t confined to equities, with yields on US Treasuries ticking higher.
Meanwhile, the Swiss franc and Japanese yen outperformed most Group-of-10 currency peers as souring risk sentiment ramped up trader demanded for havens. A gauge of the dollar also rose.
Russia’s ruble, meantime, was up 0.4% to 76.8 per dollar after reversing earlier losses. The currency briefly turned negative on the day amid the Ukrainian president’s comment.
It was the second time Monday that news on the tensions in eastern Europe sent markets lurching. Futures on the S&P 500 erased losses around 8 a.m. New York time after Vladimir Putin’s top diplomat urged the Russian president to continue talks with the West, with negotiation options “far from exhausted.”
Risk assets started showing acute sensitivity to the situation in Ukraine last week as tensions mounted. Stocks plunged late Friday, Brent crude rose to the highest since 2014 and Treasuries surged on haven demand after a growing list of nations advised citizens to leave Ukraine. Russia has repeatedly rejected charges it plans to invade Ukraine.
Wariness was evident again in markets on Tuesday, with Asian stocks mostly on the back foot and US equity futures struggling to make much headway.