Indian stocks gave up most early gains on Tuesday. European equities slid and the region’s bond yields fell as Ukraine, according to the Russian military, fired US-supplied, long-range missiles at one of the latter’s military facilities.
The strikes came on the heels of Putin permitting use of nuclear weapons in the conflict, heightening concerns of a full-blown war involving nations of the west that are Ukraine’s allies.
Traders haven’t hit the panic button just yet, probably in anticipation that Donald Trump’s return as US president could result in de-escalation. Trump had pledged to end the war after his election win earlier this month. He returns to the White House on January 20.
Escalation in Conflict
Pan-Europe index Stoxx 600 was down 0.8% at the time of going to print, while traditional haven assets such as gold, the Japanese yen and the Swiss franc were gainers. Brent crude futures were down 0.1% at $73.23 a barrel. Bitcoin crossed the $ 92,000 level for the first time, up 2.2%. The 1,000-day-old Russia-Ukraine conflict worsened this week after outgoing US President Joe Biden lifted a ban on Ukraine using American long-range missiles against Russia, following news reports that North Korea, Moscow’s ally, had deployed troops in Ukraine. The go-ahead to fire rockets into Russia marks a crucial policy change. According to reports, North Korea may send as many as 100,000 troops to aid Russia’s war against Ukraine.
ETMarkets.comDmitry Medvedev, the deputy chairman of the Security Council of Russia, on Tuesday warned of “World War III” on X. “Russia’s new nuclear doctrine means NATO (North Atlantic Treaty Organisation) missiles fired against our country could be deemed an attack by the bloc on Russia,” said Medvedev. “Russia could retaliate with WMD (weapons of mass destruction) against Kiev and key NATO facilities, wherever they’re located.”
The war, which started in February 2022 when Russia invaded Ukraine, has hit the global economy, sending food and energy prices higher. The two are among the top exporters of agricultural and related products.
Europe has been worst hit, with the continent being forced to snap direct ties with energy partner Russia, one of the world’s biggest oil producers. Since February 2022, western nations have imposed more than 16,500 sanctions on Russia, according to the BBC.
The rupee on Tuesday remained largely steady before closing at 84.41 per dollar. However, traders expect sharp swings in the offshore market amid escalating war tensions.
The offshore or non-deliverable forward (NDF) market levels work as a proxy for the currency levels in the domestic market.
“Things are looking a bit murky right now, but geopolitical situations are always difficult to predict,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors. “But in the NDF market, yes things will be volatile for the rupee now. The exchange rate has touched 84.50 in the offshore market.”
