The rouble slid to a more than three-week low on Monday, erasing earlier gains in a volatile session, and Russian stocks plunged as Western fears of an imminent military action in Ukraine outweighed hopes that diplomatic efforts would yield results.

The Kremlin said there were no concrete plans yet for a summit between Russian President Vladimir Putin and U.S. President Joe Biden, but that a call or meeting could be set up at any time, offering a possible path out of one of the most dangerous European crises in decades.

But Russian assets, highly sensitive to any news over Ukraine, headed lower as Britain warned that a Russian invasion of Ukraine was highly likely and reports of sporadic shelling continued.

Continues to Deny Ukraine Invasion

Moscow has repeatedly denied that it plans to invade its neighbor.

By 1212 GMT, the rouble was down 1.5% against the dollar at 78.45, its weakest since Jan. 27, sliding from as strong as 76.1450 earlier in the session.

It had lost 1.6% to 88.96 against the euro, earlier hitting its weakest point since Jan. 27.

"The week again opens to a wind of fragile hope on the geopolitical front," said BCS Global Markets, pointing to the possible Putin-Biden summit and a meeting between U.S. Secretary of State Antony Blinken and Russian Foreign Minister Sergei Lavrov planned for Feb. 24.

"All said, hope dies hard, but the risk of conflict lingers."

Yields on Russia's 10-year benchmark OFZ bonds leapt to 10.22%, their highest since February 2016. Yields move inversely to prices.

Russia's longer-dated sovereign dollar bonds traded near their lowest since March 2020.

Sweeping Financial Sanctions

Despite Moscow's repeated denials its assets have been hammered by fears of a military conflict that would almost certainly trigger sweeping new Western sanctions against Moscow.

Washington has prepared an initial package of sanctions against Russia that includes barring U.S. financial institutions from processing transactions for major Russian banks, three people familiar with the matter told Reuters.

Shares of Russia's top bank Sberbank fell 8.4%, underperforming the wider market, which had sunk to its lowest since November 2020. VTB was trading 6.4% lower.

The dollar-denominated RTS index was down 8.7% at 1,271.1 points. The rouble-based MOEX Russian index was 6.8% lower at 3,164.2 points.

"Russian equities remained under pressure amid ever more worrying news from the self-proclaimed republics of Donetsk and Luhansk," said Aton investment management firm in a note.