- Markets will suffer as sanctions intensify and Russia's invasion of Ukraine hits resistance, Rabobank said.
- Russia's ruble fell almost 30% and US stock futures plunged after Western allies stepped up sanctions.
- Friday's stock rally was fueled by weak measures and expectations of a quick end to the war — a view reversed at the weekend.
Ukraine's stiff resistance to invasion and tough new sanctions mean military defeat for Russian President Vladimir Putin — and don't bode well for markets, according to a top Rabobank strategist.
The ruble fell 30% to a record low against the dollar Monday, and global stocks tumbled, as traders assessed the impact of fresh measures imposed on Russia at the weekend.
Meanwhile, futures on the Dow Jones, S&P 500, and Nasdaq all lost more than 1%, while European stocks slid as well.
In recent days, Russia's military operation has suffered more setbacks than it anticipated from Ukraine's resistance, while also struggling with problems getting supplies to troops, UK and US officials said.
"Vladimir Putin has lost this war — and so have markets," Rabobank global strategist Michael Every said in a note Monday.
"The greatest risks lie in how much damage he is prepared to inflict on to attempt to deny that fact."
He said two factors helped drive a relief rally for stocks Friday, when the Dow Jones Industrial Average surged 800 points. First, the expectation the conflict would end swiftly in a Russian victory, and second, the West's sanctions at the time were seen as too weak.
But defiant words from Ukraine's leader President Volodymyr Zelensky and tougher measures from the West have changed the situation, Every said.
"If Putin wants to win militarily he will have to get even more destructive; yet the more he does, the more Ukrainians and the West will resist."
In a joint statement Saturday, Europe and Canada joined the US in excluding certain Russian banks from the global SWIFT banking system, the infrastructure that underpins payments across borders — a move seen as effectively cutting off Russian exports.
The Western allies also blocked $630 billion in foreign exchange reserves held by the Central Bank of Russia, with the aim of preventing it from circumventing sanctions.
"So, we have the likelihood of a protracted war in Ukraine, including across the key grain ports of the south; massive economic and financial damage in Russia; spillovers into the real economy globally; a remaining risk that Russia turns off the energy taps; and finding out what being forced out of the US/global financial system really looks like – for the world's largest nuclear power," Every said.
One major tail risk is that Putin will see the West's moves as the foreign interference he has already warned would entail terrible consequences, the Rabobank strategist noted.
"The fight is here: the West needed ammo, and it won't give markets an easy ride," he added.
Insider's live blog of the invasion is covering developments as they happen.