Investors are bracing for a bear market in equities from the Ukraine fallout, and assets are fleeing in some surprising directions.

Global stock markets were deep in the red on Thursday, with shares on the Russian stock market giving up $250 billion in value, according to a «Bloomberg » (behind paywall).

Chinese Bonds vs US Treasuries

As expected in times of conflict, asset flight to safe havens is underway and is finding some surprising destinations.

The Chinese yuan moved to its highest value against the dollar in four years, according to the «Bloomberg» article, and is related to the economic support measures Beijing has promised.

This is not just limited to the yuan, with China’s government bonds attracting almost $100 billion in funds last year, they are seen as competition to U.S. Treasuries.

But is China the winner of Russia's declaration of war on Ukraine? A run on the yuan could be a double-edged sword for the country, with a relative yuan strengthening making China’s production more costly. State intervention in the national currency would be inevitable as a consequence, making the yuan a perceived safe haven.

FX Intervention

Russia’s central bank announced a series of stability measures for the financial markets, including intervention in the foreign exchange markets as the ruble is getting clobbered by current events. 

Crypto Correlated

Surprisingly, major cryptocurrencies have also taken a beating with digital assets already losing a third of their value since the end of the year, a result of the looming turnaround in interest rates. So it seems they are at least behaving like traditional currencies.

For some crypto pioneers such as Moscow-born Ethereum founder Vitalik Buterin this is just fine, and he recently expressed his delight that speculators are leaving the sector.

Central Banks and Inflation

On one hand, current events could prompt major central banks from moving further, or at all, on pursuing looser monetary policy. This was suggested by a «Reuters» interview (access restricted) with European Central Bank governing council member Yannis Stournaras. 

The situation in Ukraine leaves the economic situation «much more uncertain» and the ECB should act with caution, he said. 

Unfortunately, the conflict is also leading to higher energy prices with Brent crude oil currently topping $100 a barrel and feeding inflation fears. 

Traditional Safe Havens

Proven safe havens such as the U.S. dollar, the Swiss franc and gold can still be relied upon. In fact, gold, which was rather subdued last year in relation to stocks, is making something of a comeback, rising to its highest level in twelve months.

Soft commodities are also sought after with soybeans, oats and wheat prices heading higher, as Swissquote notes.

Metals prices other than gold have too benefitted, with silver, platinum and palladium higher. The latter is mined mainly in Russia and used as the physical basis of index funds. 

Palladium bars in the vaults of physical funds managers often have the old abbreviation of the Soviet Union, which Ukraine was a part of: CCCP.