S&P 500 Futures Poised for Correction on Rising Ukraine Tensions

(Bloomberg) — Futures tracking the S&P 500 Index headed for a technical correction as intensifying tensions between the West and Russia over Ukraine drove investors out of riskier assets.

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March contracts on the S&P 500 were down 1.4% at 8:38 a.m. in London after earlier slumping as much as 2.2% from their Feb. 18 close and taking losses from an early-January high to more than 10%. U.S. equity markets were shut Monday for a holiday. Nasdaq 100 futures tumbled almost 3% before trading down 2.1%, while Dow Jones futures were 1.2% lower.

Global equities also tumbled as Western condemnation grows after Russian President Vladimir Putin officially recognized two self-proclaimed republics in eastern Ukraine and ordered his forces to go into the regions. It follows weeks of warnings from the U.S. and its allies that Putin could be planning to invade Ukraine, something he has repeatedly denied.

Read: Putin Orders Forces to Separatist Areas of Ukraine After Decree

“It’s a fluid situation in the evolving geopolitical thematic we see before us,” Chris Weston, Melbourne-based head of research at Pepperstone Financial Pty, wrote in a note. “Traders are currently playing defense as lower liquidity, driven by the U.S. Presidents Day holiday, exasperates moves.”

President Joe Biden issued an executive order prohibiting U.S. investment, trade, and financing to separatist regions of Ukraine, and a senior administration official said further measures are coming Tuesday including economic sanctions.

“The West will demonize the move and apply sanctions, but we need to see how far these sanctions go to determine outcomes,” said Keith Temperton, a trader at Forte Securities. “My view is: expect the sanctions to be less aggressive than the market expects.”

Russian assets also slumped, with the benchmark MOEX stock index sinking more than 9% and extending its steepest decline Monday since the annexation of Crimea in March 2014. In Europe, the Stoxx 600 Index was down 1% and also approaching correction territory, with automakers and banks the biggest decliners. Energy stocks were the only gainers in morning trading.

READ: Ukraine, China Tech Woes Combine In More Pain for Asia Stocks