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U.S. equity futures moved lower in early Tuesday trading, while Treasury bond rallied and the dollar ticked higher, as investors retreated to safe-haven assets amid a worrying escalation of rhetoric and positioning in the ongoing war between Russia and Ukraine.
Russia President Vladimir Putin approved a so-called nuclear doctrine in response to reports that U.S. President Joe Biden has allowed Ukraine to use American-made missiles to launch strikes on Russia-based targets.
The new Russian doctrine declares that any conventional attack on Russia, which is supported by a nuclear power, can be considered a joint attack and could be justified with a nuclear response.
“The use of western non-nuclear missiles by Kyiv against Russia, under the new doctrine, could provoke a nuclear response,” said Kremlin spokesman Dmitry Peskov during a press briefing in Moscow.
The potential escalation of the conflict, which is deep into its second year, sends shares in Europe lower, with the Stoxx 600 falling 1% in early Frankfurt trading and Britain’s FTSE 100 down 0.4% in London.
JIM WATSON / AFP / Mikhail Svetlov/Getty Images
A flight-to-safety trade also triggered a rally in U.S. Treasury bonds, sending yields on 10-year notes around 8 basis points lower from Monday levels to 4.357% and 2-year notes 9 basis points lower to 4.213%.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.14% higher at 106.431.
The cautious action looks set to spillover onto Wall Street, as well, with futures contracts tied to the S&P 500 suggesting a 20 point opening bell decline for the benchmark and the Dow Jones Industrial Average called 240 points lower.
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The tech-focused Nasdaq, meanwhile, is priced for a more modest 45 point pullback with Nvidia (NVDA) rising nearly 1% in premarket trading.
Walmart (WMT) shares were also active, rising 1.63% ahead of the retail giant’s third quarter earnings prior to the opening bell, as investors looked to a key reading on consumer spending into the holiday period.
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In overseas markets, stocks were broadly positive following on from last night’s solid close on Wall Street, and prior to the news out of Russia, with the regional MSCI ex-Japan benchmark rising 0.67% into the close of trading and the Nikkei 225 closing 0.51% higher in Tokyo.
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