Global stocks briefly fell and investors fled to safe-haven assets for a time on Tuesday, as global markets reacted to escalating tensions between the world’s two largest nuclear powers: Russia and the U.S.
The pan-European Stoxx 600
stock index came off previous lows to end the trading day down 0.45% after touching its lowest level since August.
In the U.S., meanwhile, many stocks reversed early losses — driven by Nvidia
shares — with the Nasdaq Composite closing higher by 1.04%. The S&P 500 finished 0.40% higher, while the Dow Jones Industrial Average lost 0.28%.
The moves came after Russian President Vladimir Putin amended the country’s nuclear doctrine that outlines the conditions that would prompt Moscow to deploy its nuclear arsenal.
While Moscow had signaled an interest in updating the doctrine months ago, the latest amendments are nevertheless being implemented within days of a U.S. decision to allow Kyiv to use American-made long-range missiles against targets in Russia.
The updated nuclear doctrine outlines the conditions that would prompt Moscow to deploy its nuclear arsenal and, critically, expands the circumstances under which it will consider nuclear retaliation.
Kremlin spokesperson Dmitry Peskov said the updated code now “states that the Russian Federation reserves the right to use nuclear weapons in the event of aggression with the use of conventional weapons against it or the Republic of Belarus, which creates a critical threat to sovereignty or territorial integrity. Aggression against the Russian Federation by any non-nuclear state with the participation or support of a nuclear state is considered a joint attack,” according to NBC News reporting.
The prospect of a potential nuclear escalation drove investors into safe haven markets, with gold
prices up 0.8% late in the day in New York. Treasury prices rose, meanwhile, sending yields lower as investors moved away from risk assets.
“The sharp drop in bond yields and USDJPY was of course notable, but I think even more telling is how quickly it … faded,” Erik Nelson, macro strategist at Wells Fargo, told by email, in reference to the dollar and yen exchange rate.
“There is clearly still a bias to position for higher inflation and sturdy growth as we get into the final weeks of the year. Market participants likely recall the headline risk from the earlier stages of the Russian-Ukraine war and will likely be inclined to fade any dips in yields and USDJPY so long as any indications of escalation remain more verbal in nature.”