Political | Process

U.S. stocks retreated on Monday morning as Russian and Ukraine officials gathered to discuss a potential end to the hostilities between the two sides and the U.S. and its allies increased retaliatory sanctions.

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• The moves come amid turmoil over the conflict between Russia and Ukraine, where Ukrainian forces have held key cities including the capital of Kyiv. At the same time, Ukraine officials have arrived near the border for talks with Russian officials.

• “War is fundamentally a ‘risk off’ environment for risky assets as global investors move into sovereign bonds and other ‘safe havens’ until some kind of conclusion/new normal becomes priced in…

• Everything about this is unprecedented, so about the only rational thing to say about equities is to expect volatility to continue pending a resolution,” Raymond James strategist Tavis McCourt said in a note.

• In U.S. trading, defense stocks like Lockheed Martin and Northrop Grumman rose about 2%. Bank stocks were under pressure, with JPMorgan falling 2.8%. Cybersecurity stocks also outperformed, with Crowdstrike jumping 6%.

• Currency markets were a major area of volatility on Monday. The Central Bank of Russia more than doubled its key interest rate, to 20% from 9.5% in reaction to a currency move that saw the ruble tumble nearly 16% against the U.S. dollar. The ruble hit a record low against the dollar early Monday.

• “We may have seen the sharpest depreciation of the ruble in modern history, but this is hardly a bottom,” wrote Alex Kuptsikevich, FxPro senior market analyst. “It will be possible to talk about movement towards stabilization only after appropriate steps from politicians.”

• Over the weekend, the U.S. joined allies in Europe and Canada in moving to bar key Russian banks from the interbank messaging system, SWIFT. The system connects more than 11,000 banks and financial institutions in more than 200 countries and territories.

• Russian military vehicles entered Ukraine’s second-largest city Kharkiv with reports of fighting taking place and residents being warned to stay in shelters.

• Russian President Vladimir Putin put his country’s nuclear deterrence forces on high alert Sunday amid a growing global backlash against the invasion. Ukraine’s Defense Ministry said representatives for Ukraine and Russia have agreed to meet on the Ukraine-Belarus border “with no preconditions.”