USA: Wall Street opens lower on threat of war in Ukraine

Record ID: 187322

  • Title: USA: Wall Street opens lower on threat of war in Ukraine
  • Date: 3rd March 2014
  • Summary: NEW YORK CITY, NEW YORK, UNITED STATES (MARCH 3, 2014) (REUTERS) (SOUNDBITE) (English) MICHAEL GAPEN, CHIEF U.S. ECONOMIST, BARCLAYS CAPITAL, SAYING: "These types of geo-political events get everybody nervous. We don't really know where this is going or exactly how it will unfold. So the general response is you take a little bit less risk or trim your risky positions. So you've seen equity markets down in Europe and in emerging markets - we're also seeing that here at the open in the U.S. and you tend to see a flight to quality."
  • Embargoed: 18th March 2014 12:00
  • Keywords:
  • Location: Ukraine
  • Country: Ukraine
  • Topics: Economy
  • Reuters ID: LVAECADU0YAUSI5D8YD5K4KY2836
  • Story Text: U.S. stocks fell on Monday (March 3) alongside other risk assets globally as Ukraine and Russia prepared for possible war after Russian President Vladimir Putin declared he had the right to invade his neighbor.
    Ukraine mobilized for war on Sunday (March 2) and Washington threatened to isolate Russia economically as Moscow's biggest confrontation with the West since the Cold War unfolded.
    The S&P 500 had closed at a record high on Friday, and profit-taking was expected on Wall Street due to the political uncertainty.
    "These types of geo-political events get everybody nervous," said Michael Gapen of Barclays Capital about the market's reaction to the situation in Ukraine.
    "The general response is you take a little bit less risk or trim your risky positions ... you tend to see a flight to quality," added Gapen.
    The Dow Jones industrial average fell 160.16 points or 0.98 percent, to 16,161.55, the S&P 500 lost 15.52 points or 0.83 percent, to 1,843.93 and the Nasdaq Composite dropped 41.87 points or 0.97 percent, to 4,266.249.
    Russian stocks and bonds fell sharply and the central bank hiked interest rates to defend the ruble. The MICEX index of Moscow stocks tumbled 11 percent to 1,288.81. The dollar-denominated RTS stock index tumbled 12 percent.
    Energy stocks could lose if relations between the United States and Russia deteriorate further. Volatility will likely spike alongside the uncertainty of the situation and any santions against energy-producing Russia could have an effect on the U.S. economy, says Gapen.
    "The U.S. consumer is the most energy sensitive consumer globally," said Gapen.
    "The U.S. has a pretty good outlook for 2014 and 2015 and that's been supporting equity market valuations and risk sentiment but higher oil prices would be something that would feed back as a drag on consumption. We've seen a little bit of a rise in oil but that's where I would be looking longer term," he added.
    The initial reaction in energy stocks was on the upside, however, as both Brent and U.S. crude prices rose more than 2 percent each.
    Gold prices hit a four month high as investors sought safe-haven assets, boosting gold stocks. U.S.-traded AngloGold Ashanti shares gained 3.7 percent to $18.23 (USD).
    Though the focus will likely remain on Ukraine, the economic calendar was busy on Monday. U.S. consumer spending rose more than expected in January, likely as chilly weather boosted demand for heating. Separate data showed U.S. manufacturing growth rebounded off an eight-month low in February, helped by a recovery in new orders, and construction spending unexpectedly rose in January.
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