Investors went scurrying for relative safety on Monday with the rising threat of war between Ukraine and Russia prompting stocks to push down sharply, Reuters reported.
The Moscow stock market went down 9 percent and lifted gold to a four-month high.
With Russian troops already on Ukrainian soil after an incursion into Crimea, comments over the weekend from President Vladimir Putin that he had the right to invade the rest of the country were treated as a declaration of war by Kiev.
"Geopolitical ripples from those statements, which included condemnation from the Group of Seven major industrialized nations, spread through markets, hitting Russian assets the hardest and forcing the Russian central bank to aggressively raise interest rates," Reuters reported. "Russia's stock market nosedived 9 percent at the open on Monday while the rouble fell 2 percent to record lows against the dollar and the euro before recovering to trade up 1.3 percent after the central bank dramatically lifted its key lending rate by 1.5 percentage points to 7 percent at an unscheduled meeting."
While the cost of buying 5-year swaps to insure against a Russian debt default jumped 33 basis points, Russia's sovereign dollar bonds were also hit, down 2 points.
"Investors had underestimated the risks of an escalation in Ukraine, so the events over the weekend are a wake-up call for the market," said David Thebault, head of quantitative sales trading at Global Equities in Paris.
In contrast to a jump in safe-haven German Bund futures, which rose 64 ticks, the escalating tensions sent Ukraine's hryvnia to a record low against the dollar and pushed the country's dollar bonds down 6 points on Monday.
"We can expect some very sharp moves in the ensuing couple of days as markets and world leaders look to establish just how much of a threat there is to not only to stability in the area but stability across Europe," said James Hughes, chief market analyst at Alpari UK.
Spot gold hit a four-month intraday high of $1,350 an ounce and the dollar hit a near one-month low against the yen and approached Friday's two-year low against the Swiss franc before pulling off their respective highs/lows, Reuters reported.
"It's a reaction to the escalation in tension in Ukraine over the weekend ... the traditional risk proxies are getting hit, and the safe havens are getting bid," said ANZ currency strategist Sam Tuck in Auckland.
The euro shed 0.2 percent against the dollar to $1.3778, slipping from Friday's two-month high as the euro zone economy is seen as vulnerable because of its dependence on gas supplies from Russia, part of which go through Ukraine.
Worries that Putin could act to restrict those gas supplies if the situation escalates further, and the prospect of a typical run-up in demand should war break out, boosted crude prices across the board.
