Passersby wearing protective face masks walk past a stock quotation board, amid the coronavirus disease (COVID-19) pandemic, in Tokyo, Japan January 25, 2022.
Passersby wearing protective face masks walk past a stock quotation board, amid the coronavirus disease (COVID-19) pandemic, in Tokyo, Japan January 25, 2022. Reuters / ISSEI KATO

Investors around the world lost their appetite for risk shortly after the U.S. market open on Wednesday with stocks turning lower and oil prices rallying as Ukraine declared a state of emergency and investors worried about a bigger Russian invasion.

Market's have been volatile since President Vladimir Putin's dispatch of troops into separatist regions of Ukraine on Monday and this triggered coordinated sanctions from Western countries on Tuesday with the prospect of more to come if Moscow sought to push further into the country.

Ukraine declared a state of emergency and told its citizens in Russia to flee, while Moscow began evacuating its Kyiv embassy in ominous signs for Ukrainians who fear an all-out Russian military onslaught. Shelling intensified in eastern Ukraine where Putin recognised the independence of two Moscow-backed regions and deployed troops as "peacekeepers".

After rising as much as 0.7% earlier on Wednesday the MSCI World Index, a leading gauge of equity markets globally, reversed course after Ukraine announced a cyber attack and declared the state of emergency. It was last down 0.5%.

Meanwhile oil futures prices higher on concerns about supply stemming from heightened fears about Ukraine.

After falling as much as 1%, Brent crude reversed course and was trading at $97.91, up 1.1%, while West Texas Intermediate was up 1.11% at $92.93 per barrel after earlier falling as much as 1.85%. [O/R]

U.S. Treasuries yields also pared gains sharply and the safe haven U.S. dollar turned slightly higher.

"The situation in the Ukraine has put a darker picture on the markets...bad news which might have been shrugged off earlier is taken much more to heart by investors," said Rick Meckler, partner, Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

"The market's in a very emotional period where you've come off a few years of outsized gains and people have been worried about whether the music is going to stop."

Treasury yields rose while bond investors monitored the Russia/ Ukraine events and remained concerned about inflation and a potential Federal Reserve policy mistake.

Benchmark 10-year notes last fell 5/32 in price to yield 1.9633%, from 1.948% at Tuesday's close. The 30-year bond last fell 3/32 in price to yield 2.2572%, from 2.253% and the 2-year note last rose 1/32 in price to yield 1.5757%, from 1.587%.

Trading was choppy in currencies with the dollar index last up 0.107% and the euro down 0.14% at $1.1309. The Japanese yen strengthened 0.01% at 115.06 per dollar, while Sterling last traded at $1.3549, down 0.24%. [L1N2UY1HI]

The Dow Jones Industrial Average fell 134.54 points, or 0.4%, to 33,462.07, the S&P 500 dropped 28.74 points, or 0.67%, to 4,276.02 and the Nasdaq Composite fell 138.46 points, or 1.03%, to 13,243.05.

After rising as much as 1.17% earlier in the day the pan-European STOXX Europe 600 index was last down 0.27%.

Gold added 0.5% to $1,907.18 an ounce.

Earlier, MSCI's index of Asia-Pacific shares outside Japan rose 0.4%.