Stocks slump as Russia downplays hopes of Biden-Putin summit

LONDON (AFP/APP): European markets slumped Monday as the Kremlin warned there were no firm plans for a summit between US President Joe Biden and Russian counterpart Vladimir Putin to avert a possible Moscow invasion of Ukraine.
Russian stock markets tumbled by double digits as the Ukraine crisis appeared to escalate rapidly, with the Russian ruble also under pressure. “Sentiment continues to be dominated by headlines concerning Ukraine, Russia and the West,” said ThinkMarkets analyst Fawad Razaqzada.
While the news of a possible summit brought relief to the markets, the Kremlin pouring cold water of the prospects of an immediate meeting unnerved markets.
Claims by Russia that one of its border posts had been shelled and that it had killed five Ukrainian “saboteurs” who had crossed into Russian territory further knocked sentiment.
Putin then said he is considering recognising the independence of east Ukraine’s two separatist republics, a move that would further complicate diplomatic efforts to resolve the crisis. Both the Frankfurt and Paris stock markets saw losses deepen to more than two percent.
On the Moscow Stock Exchange, the dollar-denominated RTS index tumbled almost 12 percent in afternoon trading. The ruble-denominated IMoex was down 9 percent.
Meanwhile, the Russian currency slumped to 78 rubles to the US dollar, still some ways off the 80 ruble threshold that it surpassed in January and triggered central bank intervention
Losses in London, at 0.8 percent, were limited on hopes for the UK economy as Prime Minister Boris Johnson was set to announce an end to all pandemic legal curbs in England.
Trading on Wall Street is closed on Monday for a public holiday, but Dow futures were around 0.7 percent lower.
Warnings from US officials that Russia could invade its neighbour imminently sent markets spiralling last week and briefly sent crude surging towards $100 per barrel as traders fret over already tight supplies.
Oil prices rose on Monday, but remained well below $100 per barrel.
Observers are warning that oil at $100 per barrel could soon be breached and could hold above that level for an extended period, even if talks on Iran’s nuclear programme succeed and lead to the resumption of Tehran’s crude exports.
The sharp rise in crude is a key driver of inflation across the planet, adding to supply chain snarls and bottlenecks.
The Ukraine crisis has also compounded worries about decades-high inflation that is causing central banks to hike interest rates.
While expectations are for a Fed rate hike next month, some bank officials at the weekend indicated they were not in favour of a 50 basis point rise, as has been suggested in light of soaring consumer prices.
The prospect of higher borrowing costs this year has weighed on markets for months, bringing a near two-year equity rally to an end with commentators predicting further volatility.
The Ukraine crisis was also driving the prices of other commodities higher.
The price of nickel, a key component in stainless steel and electric car batteries, hit the highest level in more than a decade.
Russia is one of the world’s largest producers of nickel plus other key commodities such as oil, aluminium and palladium.
Nickel forged $24,610 per tonne in trading Monday — the highest level since 2011.