(Bloomberg) -- Stocks fell around the world on Monday as geopolitical risks over Ukraine rippled through global markets, adding to concerns about inflation and the prospect of aggressive Federal Reserve interest-rate hikes to tame it.
U.S. futures dropped with European and Asian shares. U.S. airlines slid in premarket trading as Ukraine tensions hit global travel stocks, while companies exposed to Russia and eastern Europe were under pressure. Expensive growth stocks, which stand to suffer the most from higher interest rates, also fell.
Bond yields dropped and the dollar ticked up.
Tensions over Russia’s military buildup near Ukraine are entering a potentially decisive week as the U.S. warns an invasion may be imminent and President Vladimir Putin accuses America of failing to meet his demands. Russia has repeatedly denied it plans to invade its neighbor, and a diplomatic push to try to resolve the situation is continuing, with German Chancellor Olaf Scholz traveling to Kyiv, a day before heading to Moscow.
A deterioration in Ukraine could stoke concerns about price pressures if supplies of Russian energy and Ukrainian grain are disrupted. Higher energy prices have already boosted inflation across Europe, sparking a cost-of-living crisis that’s prompted several governments to step in to help cushion the blow of rising energy bills for consumers.
European natural gas prices jumped with storage facilities running low and concern over any disruption to supply from Russia, the continent’s top source. Oil fluctuated after an earlier rally put $100 a barrel in sight.
Russia is a major producer of metals such as aluminum and nickel; it accounts for about 40% of palladium, used in catalytic converters. Russia and Ukraine also account for nearly a third of wheat and barley exports, and wheat continued to advance Monday.
“The impact on inflation will go beyond oil and gas,” said Wai Ho Leong, strategist at Modular Asset Management in Singapore. “For the rest of the world, it is potentially a massive food shock.”
Among individual stock moves in Europe, Clariant AG tumbled the most in 19 years after the company postponed results amid an accounting investigation. Hungary’s Wizz Air Holdings Plc led a decline in airlines as carriers took further steps to avoid Ukraine.
One question for investors is whether stocks forged lows for the year near the end of January or face more pain on Russia-Ukraine tension.
Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets LLC, said the January lows have a good chance of holding, while Michael Wilson, Morgan Stanley’s chief U.S. equity strategist, said a potential invasion could push economies into recession.
“There’s no past conflict that provides a good template for how low stocks could trade if an invasion occurs,” Calvasina wrote in a note.
Here are some key events this week:
German Chancellor Olaf Scholz travels to Ukraine Monday and to Russia on Tuesday for diplomatic talks
European Central Bank President Christine Lagarde participates in parliament debate on ECB annual report, Monday
U.S. PPI, Tuesday
EIA crude oil inventory report, Wednesday
FOMC minutes, Wednesday
China CPI, PPI, Wednesday
G-20 finance ministers, central bank governors meet, Thursday through Feb. 18
Cleveland Fed President Loretta Mester, St. Louis Fed President James Bullard speak, Thursday
U.S. Monetary Policy Forum: speakers including Fed officials Charles Evans, Christopher Waller and Lael Brainard, Friday
For more market analysis, read our MLIV blog.
Here are the main market moves:
Stocks
Futures on the S&P 500 fell 0.7% as of 5:55 a.m. New York time
Futures on the Nasdaq 100 fell 1%
Futures on the Dow Jones Industrial Average fell 0.6%
The Stoxx Europe 600 fell 2.4%
The MSCI World index fell 1.5%
Currencies
The Bloomberg Dollar Spot Index rose 0.1%
The euro fell 0.3% to $1.1314
The British pound fell 0.3% to $1.3517
The Japanese yen rose 0.2% to 115.17 per dollar
Bonds
The yield on 10-year Treasuries declined two basis points to 1.92%
Germany’s 10-year yield declined seven basis points to 0.22%
Britain’s 10-year yield declined four basis points to 1.50%
Commodities
West Texas Intermediate crude rose 0.1% to $93.20 a barrel
Gold futures rose 0.7% to $1,855.90 an ounce
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