Wall Street and European stocks rose after days of sharp swings, reflecting uncertainty over whether Russia would escalate its assault on Ukrainian territory and the likely impact of western sanctions.
The S&P 500 added 0.7 per cent in opening trades. The broad-based share index had entered a technical correction in the previous session as the US launched a wave of sanctions against Russia and President Joe Biden accused his Russian counterpart Vladimir Putin of beginning an invasion of Ukraine.
The Nasdaq Composite rose 1 per cent. The technology-focused gauge had fallen more than 14 per cent so far this year up to Tuesday’s close, as jitters about the global fallout from economic actions against Russia weighed on markets already pressured by the Federal Reserve preparing to raise interest rates.
Volatility indices remained elevated, however, indicating that the latest rally may not hold.
Stock markets, government bonds and oil prices have traded choppily all week as Putin put his country on a war footing, endorsing claims of Russia-backed separatists to the entire Donbas region of eastern Ukraine, and western powers responded by rolling out sanctions.
Europe’s Stoxx 600 share index rose 0.7 per cent after skirting a technical correction, defined as a 10 per cent drop from a recent peak, in the previous session.
“We have a lot of volatility so what we’re seeing now is stabilisation after a big drop,” said Nadège Dufossé, head of cross-asset strategy at Candriam. “Investor sentiment had become extremely pessimistic, so that’s a contrarian signal and means that a lot of the downside risk has been integrated.”
The Vix, a measure of expected volatility on the S&P 500, traded at 28, above its long-run average of about 20. The equivalent European index was also elevated at 30.
Ukraine was preparing to impose a national state of emergency on Wednesday as President Volodymyr Zelensky called up reserve troops and his administration pleaded with the west to hit Russia with even tougher sanctions.
Germany halted certification of the Nord Stream 2 Russian gas pipeline on Tuesday, while Biden said the US had cut Russia off from western financing and announced measures to target two of the nation’s largest financial institutions.
The move helped to propel Brent crude, the international oil benchmark, to a high of $99.50 a barrel as traders also grappled with the possibility of disrupted supply from Russia. Brent fell 0.2 per cent to $96.61 on Wednesday; the marker has gained more than 3 per cent so far this week.
European natural gas contracts gained more than 10 per cent to €87.9 per megawatt hour.
Andreas Billmeier, European economist at Western Asset Management, added that markets were showing “some relief” that sanctions levelled at Russia “so far” would not disrupt the global economy.
“It could have been worse, for example by taking Russia out of Swift,” he said, referring to the international payments system that underpins trillions of dollars worth of transactions each year.
The yield on the 10-year US Treasury note rose 0.02 percentage points to 1.97 per cent as the low-risk debt instrument fell in price, signalling an improvement in equity market sentiment on Wednesday.
The dollar index, which measures the US currency against six others, edged 0.1 per cent lower.
Spot gold, a popular investment during heightened geopolitical tensions, added 0.1 per cent to $1,901 an ounce.