European and Asian stocks fell on Monday after the United States warned that a Russian invasion of Ukraine could happen as soon as this week. But stocks pulled back from their steep selloff on renewed hopes that an armed conflict could be avoided.
At mid-day in Europe, London's FTSE 100 was down 1.1%, while Germany's DAX 30 and France's CAC 40 fell 1.9% and 2.1%, respectively.
Investors in Asia were equally jittery, as Japan's Nikkei 225 closed down 2.2%, while South Korea's Kospi was down 1.6% at the end of the trading day.
Chinese markets saw losses, too, with the benchmark Shanghai Composite Index down 1%. Hong Kong's Hang Seng Index fell 1.4%.
"The escalation of Russia and Ukraine tensions come at a time when the stock market is already vulnerable given inflation worries and the potential for Federal Reserve tightening," said George Ball, chairman of investment firm Sanders Morris Harris.
But US futures pointed higher, with Nasdaq futures, S&P 500 futures and Dow futures each tracking 0.1% higher.
Stock futures trended higher after Kremlin spokesperson Dmitry Peskov on Monday opened the door to a negotiated resolution to tensions. If Ukraine refused "the idea of joining NATO" it "would significantly contribute to the formulation of a more meaningful response to Russian concerns," Peskov said.
The Ukrainian and Belarusian defense ministers also held a "positive" phone call aimed at relieving tensions. Russia has sent tens of thousands of troops into Belarus near the Ukrainian border.
Brent crude futures were trading at $93.91 a barrel — after starting the year at $78.11 — as worries mount that a Russian invasion of Ukraine could disrupt energy supplies. European natural gas and electricity prices spiked.
This weekend, US President Joe Biden warned Russian President Vladimir Putin during a call that the United States and its allies will respond "decisively and impose swift and severe costs" on Russia in the event of an invasion.
Russia has more than 100,000 troops near the Ukraine border, with thousands added just this week, according to a US administration official.
The upside for stocks may be limited.
"If an armed conflict between Russia and Ukraine is somehow avoided, a short lived relief rally is likely, but there are still too many worries on the horizon for any type of longer lasting upward move higher in stocks," said Ball.