Gold, oil rise as Ukraine tensions spur safety bids
By Herbert Lash
NEW YORK (Reuters) - Russia's intervention in Ukraine drove up crude oil and prices for gold and government debt on Monday as the heightened tensions spurred investors to seek safe havens and sell any exposure to the region.
Crude prices rose more than $2 a barrel, gold futures jumped 2 percent and prices of top-rated euro zone government bonds surged. The aversion to risk took a steep toll on equities markets, with the Russian stock market .MCX slumping 11 percent. Stocks across Europe and on Wall Street also took a beating.
Market volatility indexes, a sign of investor apprehension, surged, with the Euro STOXX Volatility Index .V2TX spiking 30.4 percent in its biggest one-day gain since 2011. The U.S. CBOE volatility index rose 15.9 percent.
"Investors had underestimated the risks of an escalation in Ukraine, so the events over the weekend are a wake-up call for the market," said David Thebault, head of quantitative sales trading at Global Equities in Paris.
President Vladimir Putin's forces tightened their grip on the Crimea region of Ukraine, sparking the stock plunge in Moscow and forcing Russia's central bank to spend $10 billion of reserves to prop up the ruble.
Ukraine said Russia was massing armored vehicles on its side of a narrow stretch of water closest to Crimea after Putin declared over the weekend that he had the right to invade his neighbor to protect Russian interests and citizens.
The ruble traded off about 1.45 percent after earlier touching record lows against the dollar and the euro. The central bank lifted its base lending rate by 1.5 percentage points to 7 percent at an unscheduled meeting.
Russia's sovereign dollar bonds also fell, while the cost of buying five-year swaps to insure against a Russian debt default jumped 33 basis points. Continued...