- Global stocks traded nervously Tuesday after Russia and Ukraine failed to reach an initial ceasefire deal.
- Investors are concerned about the threat of disruption to commodities from Russia, UBS said.
- China signed some Russian banks onto its own payments system after Western nations cut them off from SWIFT.
Global stocks made cautious moves Tuesday as investors regained some composure on the back of Russia and Ukraine agreeing to keep peace talks on the table.
The first round of talks aimed at ending the fighting between Russia and its neighbor ended with no agreement Monday, but another round is set to take place in the coming days on the Polish-Belarusian border.
Futures on the Dow Jones fell 0.5% as of 5:20 a.m. ET, while those on the S&P 500 dropped 0.6%, and Nasdaq futures lost 0.8%, suggesting a lower start to trading later in the day.
The MSCI International broad-based index, which tracks stocks across developed markets, slipped 0.1%.
"Market anxiety resurfaced after ceasefire talks between Russian and Ukrainian officials failed to produce a breakthrough," UBS strategists said in a Tuesday note. "Meanwhile, invading Russian forces encountered determined resistance from Ukrainian troops and civilians on a fifth day of conflict."
A key investor focus is the threat of disruption to commodity exports from Russia, whether as a consequence of military action, Western sanctions, or an effort to penalize nations supporting Ukraine, UBS said.
Over the weekend, the US and its allies imposed harsh restrictions on Russia that include cutting off access to the SWIFT global payment system. The move was aimed at immobilizing Russia's international trade.
However, China has provided a lifeline by signing Russian banks onto its own payment settlement system.
"The role of China is crucial, as their insatiable appetite for raw materials and energy is a key support for Russia," Steven Bell, chief economist at BMO Global Asset Management, said in a note. "China may hold the key to Russia's ability to sustain the conflict."
In Asian stock markets, the Shanghai Composite rose 0.7%, and Hong Kong's Hang Seng gained 0.2%. Tokyo's Nikkei added 1.2%.
Safe-haven gold rose 0.9% to $1,919.40 an ounce. Russia's ruble steadied after crashing as much as 30% to a record low of 120 against the dollar. The dollar index rose slightly by 0.2% to 96.96.
Europe, due to its geography and energy dependence on Russia, is much more exposed than the US and the rest of the world to the effects of the crisis, BMO's Bell said.
More European companies appear to be divesting or selling Russian assets. Energy giant Shell exited all its joint ventures with Russian-controlled Gazprom on Tuesday, a day after BP quit its stake in Rosneft.
London's FTSE 100 dropped 0.5%. The pan-European Euro Stoxx 600 fell 1.1%, and Frankfurt's DAX slid 2.1%.
Saxo Bank's strategy team expects European companies with exposure to Russia to remain under pressure as more of them contemplate their next moves.
Another focus in markets will be President Joe Biden's State of the Union address before Congress on Tuesday. This comes at a difficult time for the US leader, who now has the worst favorability ratings of his presidency, under pressure from rising inflation — surging gas and food prices in particular — and the Russia-Ukraine situation.
Oil prices gained ground as the conflict in Ukraine raised concern about protracted disruptions to supply.
Brent crude futures were up 3.5% at $101.40 a barrel at last check, but were trading below a seven-year intraday high of $105.79 touched after the start of Russia's invasion last week. West Texas Intermediate rose 2.9% to $98.56 a barrel.