Putin issues warning to U.S with new nuclear doctrine, global markets sell off
LONDON, Nov 19 (Reuters) -Russian President Vladimir Putin on Tuesday lowered the threshold for a nuclear strike in response to a broader range of conventional attacks just days after the White House reportedly allowed Ukraine to fire American missiles deep into Russia.
Ukraine used U.S. ATACMS missiles to strike Russian territory for the first time on Tuesday, Moscow said.
Government bonds and the Japanese yen rallied, while stocks and the euro fell, as investors bought safe-haven assets in a sign of increased investor angst amid escalating geopolitical tensions.
Ukraine's sovereign dollar bonds shed nearly 2 cents and defence stocks in Europe performed well with shares in Germany's Rheinmetall hitting a fresh record high.
COMMENTS:
MICHAEL WEIDNER, CO-HEAD OF GLOBAL FIXED INCOME, LAZARD ASSET MANAGEMENT, FRANKFURT:
"The market's movement appears to be driven by this morning's news about changes to Russia’s nuclear doctrine. Despite Russia hinting at a revision back in September, the market is reacting strongly now (1000 GMT). This safe haven 'trade' is evident across various asset classes, with a strong bid in the dollar, Swiss franc, and even to some extent in gold."
"In our view, the reaction seems somewhat overdone, but the high geopolitical uncertainty is clearly causing elevated rates volatility at the moment. This trend will likely persist through the end of the year and well into 2025."
BOB SAVAGE, HEAD OF MARKETS STRATEGY AND INSIGHTS, BNY, NEW YORK:
"(It's) risk off as markets digest the escalation in Ukraine/Russia war after Putin advances a pledge to expand his nuclear doctrine - allows use in response to conventional attacks - after Ukraine uses Western missile on Russian territory."
"The notable flows were in JPY (the Japanese yen) which returned as a safe haven."
PIOTR MATYS, SENIOR FX ANALYST, IN TOUCH CAPITAL MARKETS, POLAND:
"The CEE currencies (central and eastern Europe) led by (Poland's) zloty are under selling pressure driven by rapidly escalating market concerns about geopolitics.
"President Putin officially ratified an updated Russia’s nuclear doctrine. This was very shortly followed by RBC-Ukraine reporting that Ukraine used ATACMS to hit targets in Russian territory. The zloty is the most sensitive and exposed to further developments in geopolitics. Investors are concerned that tensions may escalate markedly after Russia updated its nuclear doctrine that essentially lowers the threshold for using nuclear weapons."
NICHOLAS REES, FX MARKET ANALYST, MONEX EUROPE, LONDON:
"We've seen a fairly significant sell off across most major currencies, obviously concentrated in CEE and Europe given the proximity (to the conflict)."
"It's the geopolitical risk that's weighing on markets now. The big trigger for markets was that attack by Ukraine this morning. It was within a matter of minutes of that hitting the Bloomberg headlines that all of a sudden we started to see that sell off."
ARNE PETIMEZAS, DIRECTOR RESEARCH, AFS GROUP, AMSTERDAM:
"Seeing clear risk off moves on the Russian nuclear doctrine change and Ukraine ACTAMS attack within Russia headlines. Gold, bonds and Swiss franc up; euros and equities down".
"President Trump wants to end the war, but things seem to be going the other way. Ukraine seems to have attacked Russia with missiles, which the Europeans clearly do not want. Russia is escalating with the North Korean troops, the new nuclear doctrine, and its advance in the Donbass. Then there is the peculiar denial by the Kremlin of the phone call with Trump."
"If he wants to end the war soon, President Trump has his work cut out for him."
LEE HARDMAN, SENIOR CURRENCY ANALYST, MUFG, LONDON
"The flight to quality that we're seeing in the FX markets and markets more broadly is triggered by the tensions that are building between Russia and Ukraine."
"The U.S. allowed Ukraine to use long range missiles to attack Russia, and that's obviously heightened fears over how Russia will respond, and reports this morning suggested that Russia has changed how they can use nuclear missiles, so they could potentially respond to long range missile attacks by striking back using nuclear missiles."
"Understandably, that has caused some concern amongst market participants this morning, and then we've also just had reports suggesting that Ukraine has used long range missiles to strike Russia for the first time. So those two reports have contributed to this risk-off move in markets this morning."
Reporting by the Reuters Markets Team; Compiled by Dhara Ranasinghe; Editing by Alun John
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