Investors were looking for security ahead of the weekend because of renewed U.S. warnings about an imminent Russian invasion.
As shelling intensified in eastern Ukraine, sentiment soured and a rebel leader announced a surprise evacuation. This was a surprising development in a conflict that the West suspects Russia will use as a justification for an invasion of its neighbor.
The dollar recovered and the safe-haven Swiss Franc rose, a result of a positive mood that improved on Thursday's news that U.S. Secretary Antony Blinken would be meeting with Sergei Lavrov, Russian Foreign Minister.
The dollar index, which measures the greenback's value relative to six major trading currencies rose 0.301% while the euro against the Franc fell 0.19%. These currencies are often the recipients of safety flights during times of crisis.
As fears of a Russian military conflict triggering sweeping Western sanctions against Russia, the ruble fell 1.40% to 77.16 dollars.
Annalena Baerbock (German foreign minister) said that all options are on the table for sanctions against Russia if it attacked Ukraine. This includes the Nord Stream 2 pipeline which is intended to bring Russian gas into Germany.
Cherry Lane Investments partner Rick Meckler said that investors are waiting for the weekend to end to evaluate an already weaker equity market. He stated that rising interest rates could hurt growth stocks and that they will continue to decline.
Meckler said, "Coming into the weekend with geopolitical worries and what's been an inexorably weak market, many people gave up."
The pan-regional STOXX 600 share indice fell to 0.81% in Europe after initial gains. Travel and banking shares led the fall. The MSCI gauge of stocks around the world lost 0.85%, almost 7% this past year.
Wall Street saw the Dow Jones Industrial Average fall 0.68%, S&P 500 lose 0.72%, and the Nasdaq Composite drop 1.23%. Exception: Consumer staples, which are able to withstand economic downturns.
After excluding an all-out war, the worst scenario would see Russia occupying most Ukraine and suffering severe economic consequences. This would slow down the global economy, according to David Kelly, chief global strategist for JPMorgan Funds.
Kelly stated that while you may see an increase in inflation, the Federal Reserve will likely see a spike of energy prices with more uncertainty associated with disinflationary than inflationary.
Kelly said, "As an investor, I wouldn't get rid of good long-term investment because of that."
History has shown that investors underestimate the potential positive outcome of tensions rising, and they tend to overestimate their downside effects, according to Thomas Hayes (chairman and managing member of hedge-fund Great Hill Capital LLC).
Hayes stated that Russia could take Ukraine in the worst case scenario, as they did with Crimea. "Sell the rumor and buy the news," Hayes stated.
As Ukraine developments slowed risk appetite, U.S. Treasury debt and European government debt increased. The 10-year Treasury note yield fell by 5.2 basis points, to 1.922%. Meanwhile, the benchmark German 10-year bond yields saw their largest weekly drop since November. When prices rise, bond yields drop.
The key $1,900 level was a little lower for gold. U.S. gold futures fell 0.1% to $1,899.80 per ounce.
Crude oil suffered further losses and was headed for a weekly decline as increased Iranian oil exports outweighed fears of supply disruptions resulting from Russia-Ukraine.
U.S. crude futures dropped 69 cents to $91.07 per barrel. Brent, the international benchmark, was up 57c at $93.54 per barrel.
Bitcoin dropped below $40,000 at one time, but it was last down 1.45% at $41,095.93.
