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Ukraine crisis drives the financial markets today

posted on March 3, 2014 at 2:26 pm
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Gold and energy commodities are up today. So are safe haven currencies such as the yen.

The Russian ruble is down. So is the euro and emerging market currencies and markets are taking a licking.

Pretty much what you’d expect when the crisis in the Ukraine has escalated to include a threat of armed conflict between Russian and Ukrainian soldiers

The biggest move has been in the share prices of energy companies that might benefit if natural gas prices soar due to a cut-off in gas exports from Russia across the Ukraine and into Western Europe.

For example, shares of Norwegian oil and gas producer Statoil (STO) are up 2.35% today as of 2 p.m. New York time.

Shares of energy companies without any near-term way to take advantage of any stoppage were off with Chesapeake Energy (CHK) down 1.2% and France’s Total (TOT) off 2.31%.

The oil benchmark price of the West Texas Intermediate climbed 1.77%. The Brent benchmark rose 1.6%.

Most of the moves I’m seeing today aren’t specific to the crisis but are instead the standard response of traders to heightened risk. For example, the safe haven yen rose to 101.4 to the U.S. dollar. The euro is off 0.43% against the dollar. Gold is up 2.15%. The iShares MSCI Emerging Markets ETF (EEM) is down 1.89%.

The ruble is the big crisis specific loser, down 1.4% today against a basket of currencies—despite an increase in benchmark interest rates from the Russian central bank. That continues the Russian currency’s slide in 2014. The ruble is now down more than 10% for 2014

The slow response of U.S. and EuroZone diplomats to the crisis with lots of talking and not much action (not necessarily a bad thing if the alternative is shoot first and talk later) suggests that this crisis will drag on for a while. An “emergency” meeting of EuroZone leaders isn’t scheduled to take place until Thursday, March 6.

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  • dxia on 3 March 2014

    I do see Ukraine crisis to drag on for at least a few weeks, if not months. The best way to describe Putin is, “‘whatever he wants, he will get it.” Market is going to be volatile for a while. I cut my equity exposure to 75% net long this morning. There is a chance for a 10% correction some time this year. It’s not because of we haven’t got one for so long, it’s because of the market valuation and the ongoing uncertainties. If the upside potential is only 10%, then we should be a little bit more conservative. Good thing is that interest rate is still low. That limit the downside risk and keep us away from another recession.

  • dxia on 3 March 2014

    oops, my post was fragmented. It should be
    ” If the upside potential is only less than 10% and downside risk is larger than 10%, then we should be a little bit more conservative. …”

  • dxia on 7 March 2014

    Ukraine issue isn’t over yet. However, for the short term, s&p could easily go up to 1920. This shouldn’t take too long.

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