Russian mining stocks were among the first to feel the impact of Moscow's massive attack on Ukraine on Thursday, as oil surged above $105 a barrel and investors rushed to buy gold and other safe-haven assets, according to Bloomberg .
The local stock exchange suspended trading in all markets after President Vladimir Putin announced a military operation against Ukraine. As soon as they resumed, company stocks plummeted as investors braced for the toughest round of Western sanctions that wiped out $259 billion in market value.
Alrosa, the world's largest diamond producer by production, lost over 40% in the morning.
Gold miner Polymetal suffered huge losses across all the exchanges it trades on, ending the day 35% lower in Moscow. It took the biggest hit on the FTSE 100 index, losing more than 46% of its share value to £594 in the middle of the day. This is below the four-year low of £605 per share reached in October 2018.
Other Russian mining companies, including potash producer Uralkali and Gazprom, the country's largest stocks by market capitalization, also tumbled on Thursday as the ruble hit its lowest level against the US dollar.
The magnitude of the shock to the markets suggests that investors expected Putin to back down.
"Your panic button is now pressed, I don't think the market has factored in the risk of a proper military conflict," Emmanuel Cau, head of European equity strategy at Barclays, told the Financial Times. “At the moment it is difficult to understand what could be the trigger for the stabilization of the market.”
News of Russia's actions sent stock markets across Europe plummeting, with Britain's FTSE 100 down over 3% and Germany's Dax down over 4.5%. Previously, stocks in Asia also collapsed.
The price of gold, considered a safe-haven asset in times of uncertainty, jumped more than 1.7% to its highest level since the beginning of January 2021.
“Markets now more adequately assess the risk that something terrible will happen. This, combined with uncertainty, makes for a terrible environment. Nobody wants to take risk when it's up in the air,” said Rob Carnell, Head of Research Asia Pacific at ING.
Canadian mining company Kinross Gold shares fell slightly this morning in New York, despite the company saying on Wednesday that its assets in the Russian Far East, about 7,000 kilometers from Ukraine, are performing normally.
Russia accounts for a third of Europe's natural gas and about 10% of world oil production. As both Ukraine and Russia are also major crop producers, wheat and corn prices have risen by more than 5%.
