More Pain Ahead For Risk Assets Tracking Ukraine Conflict

More pain ahead for global risk assets this week on heightened volatility expected after Russian President Vladimir Putin put nuclear-armed forces on high alert on Sunday.

Global stocks started Monday in the red, with an increased flight to safety trades boosting demand for sovereign debt along with the dollar and yen, while the euro sank and the Russian rouble fell.

Enhanced Western sanctions on Russia in response to Mr Putin's most significant assault on a European state since World War Two for the fourth straight day has led to risk-aversion and caution.

"We had a deluge of very negative information over the weekend. My sense is there's not going to be much-staying power behind this particular move (in Asia-Pacific stocks), considering we're talking about financial stability risks, and sprinkle over that the threat of nuclear war," Kyle Rodda, a market analyst at IG Australia, told Reuters.

"Volatility is heightened," he said. "Price action is incredibly choppy," he added.

"Market sentiment is still likely to be dominated by the events surrounding the Russia-Ukraine conflict and won't be helped by Russia putting its nuclear forces on high alert," said Robert Carnell, Regional Head of Research for Asia-Pacific at ING.

Crude oil prices jumped on the ramp-up in tensions heightened fears that oil supplies from the world's second-largest producer could be disrupted.

While bargain hurting trades were expected, the risk is that flight to safety trades will gain prominence this week.

Indeed, that was reflected in demand for gold, which rose over 1% and was set for its best monthly gain in nine.

Gold is often used as a hedge against inflation and as a means of preserving wealth during times of financial and political uncertainty.

"COMEX gold traded about 1% higher near $1912/oz after a modest decline last week. Gold has edged up on safe-haven buying as western countries ratcheted sanctions on Russia while there is uncertainty about a major breakthrough in talks. Adding support to prices, the Bank of Russia said it would start purchasing gold again," said Ravindra Rao, Head Commodity Research at Kotak Securities.

"However, safe-haven buying has also pushed the US dollar index higher, and this has kept a check on gains in gold. Gold may remain volatile as the market reacts to Russia-Ukraine development; however, the general bias may be on the upside until there are clear signs of de-escalation in tensions," he added.

Domestic bourses, too, started the week in the red.

Indeed the BSE Sensex Index tanked over 1,000 points, while the Nifty index traded below 16,400.