- Stocks fell as investors sought safety in treasuries after the United States warned Russia that offensive military action against Ukraine could begin as soon as next week.
- Risk assets added to weekly losses as the United Kingdom and the United States advised citizens to leave Ukraine as tensions with Russia escalated. Oil prices rose as fears grew that a Russian attack would result in harsh sanctions imposed by the United States. Russia has repeatedly denied plans to invade Ukraine.
- Following Thursday's steep declines amid bets on faster Fed tightening, the S&P 500 fell 1.9% and the Nasdaq 100 fell more than 3%. Treasury bonds caught bids, with the 10-year yield falling 11 basis points to around 1.92%. Brent crude reached $95 per barrel for the first time since 2014.
- For months, the United States has been warning European allies that Russia may be preparing an invasion of Ukraine, amassing nearly 130,000 troops near the border and staging the largest joint military drills in years in neighbouring Belarus. The United States has threatened Russia with crippling economic sanctions if it attacks, while the Kremlin has stated that NATO expanding further east or deploying weapons in Ukraine are red lines.
- A Russian invasion of Ukraine would not only disrupt crude supplies, but would also likely result in retaliatory sanctions from the US. Oil prices have skyrocketed in recent weeks on speculation that demand will outstrip supply as the world economy recovers from the pandemic.
- The selloff on Friday comes a day after a strong inflation reading and comments from a Federal Reserve official sparked a selloff in stocks and bonds. Rate hikes have become more likely, with some traders speculating that a hike could occur before the next regularly scheduled meeting in March. Those concerns were effectively put to rest on Friday, when the Fed signalled that it would proceed with the last of its bond purchases before the programme expires next month. The central bank has stated that it will not raise rates until the buys are completed.
- Concerns about inflation weighed on consumer sentiment in the United States, which fell to a new decade low in early February as attitudes toward personal finances deteriorated. The sentiment index at the University of Michigan fell to 61.7, the lowest since October 2011, from 67.2 in January. Consumers anticipate a 5% inflation rate over the next year, up from 4.9% last month and the highest since 2008.
