U.S. stocks drift on Ukraine shock; oil rallies

U.S. equities drifted Tuesday as investors weighed the potential damage from sanctions to Russia after President Vladimir Putin recognized two separatist republics in eastern Ukraine and ordered troops sent to them.

U.S. equities drifted Tuesday as investors weighed the potential damage from sanctions to Russia after President Vladimir Putin recognized two separatist republics in eastern Ukraine and ordered troops sent to them.

The S&P 500 was little changed while the Nasdaq 100 inched higher after a trading holiday on Monday. The Stoxx 600 Index fell as much as 2 per cent before paring back losses to trade higher. And a flight to havens eased, as benchmark Treasury yields rose to trade at 1.95 per cent.

The European Union proposed an initial package of sanctions targeting Moscow in response to Putin’s decision to recognize the breakaway regions. It follows weeks of warnings from the U.S. and its partners that Russia could be planning to invade Ukraine, something he has repeatedly denied.

The threat of more penalties and disrupted supply kept energy prices elevated, with West Texas Intermediate crude trading close to US$93 a barrel. German Chancellor Olaf Scholz said he would halt certification of the Nord Stream 2 pipeline, sending European natural gas futures 10 per cent higher. The question now is what the U.S. and its allies would define as an invasion, and what would trigger bigger sanctions.

“The stock market is right to be concerned about current tensions between Russia and Ukraine, which run the risk of exacerbating the challenging inflation backdrop that many investors and companies have expected to improve in the back half of 2022,” wrote RBC Capital Markets’s Lori Calvasina. “The bad news is that the investment community still appears to be in the early days of understanding the potential implications of this conflict.”