By Sinéad Carew
NEW YORK (Reuters) -Investors around the world lost their appetite for risk on Wednesday, with stocks selling off and the U.S. dollar gaining some ground as Ukraine declared a state of emergency amid intensifying fears of a full-scale Russian invasion.
Trading in many asset classes has been volatile since Russian President Vladimir Putin's dispatch of troops earlier this week into parts of Ukraine. This triggered sanctions from Western countries and threats of more if Moscow advances further.
Oil futures, which were whipsawed during the day, settled well below their session highs and U.S. Treasury yields, while staying above Tuesday's close, were also volatile.
Ukraine declared a state of emergency and told its citizens to flee Russia, while Moscow began evacuating its Kyiv embassy. The Russian-backed separatist leader of a Ukrainian breakaway region said Ukrainian government forces should withdraw from territory that his self-proclaimed state has claimed and take their weapons with them.
A senior U.S. official said on Wednesday that Russia is as ready as it can be to launch what could be a full-scale invasion, with 80 percent of troops assembled around Ukraine in attack positions.
After rising as much as 0.7% earlier on Wednesday the MSCI World Index, a leading gauge of equity markets globally, reversed course in morning trading and deepened losses as the day wore on to finish off 1.2%, registering its lowest level since April 2021. After falling as much as 1% and rising almost 2% during the day, Brent crude settled unchanged from Tuesday's close at $96.84, while West Texas Intermediate settled up 0.21% at $92.10 per barrel after earlier falling as much as 1.9% and rising 1.7% all in the same day. [O/R]
Investors have also been grappling with the prospects of a U.S. Federal Reserve policy tightening aimed at combating surging inflation. But these worries have "been somewhat superseded by events in eastern Europe and in Russia," said Rhys Williams, chief strategist at Spouting Rock Asset Management.
"So in the very short term, markets will go up or down based on whether (Putin) marches to Kyiv," said Williams, adding that investors had appeared to accept Russia's move into the Donetsk and Luhansk regions in Ukraine.
But if Putin "goes to Kyiv and there is a regime change and potentially a guerrilla war for the next two generations, that's a more difficult scenario and there is frankly only one person who can decide this."
The Dow Jones Industrial Average fell 464.85 points, or 1.38%, to 33,131.76, barely above the 33,119.685 level that would have confirmed a correction.