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Markets have recovered from their earlier brief panic, as the milder reaction of US traders has probably helped to restore a sense of perspective. Although markets had already been monitoring the escalating tensions in Ukraine, the swift action taken by Vladimir Putin this weekend have caught many people by surprise.
Miners benefit from flight to safety
The UK has considerably less dependence on energy supplies being piped through Ukraine than most of her mainland European counterparties, however companies like BP – with its affiliation to Rosneft, Russia’s biggest oil producer – have still weighed heavily on the index.
In a rare moment of optimism it was chocs away for Thorntons, as the share price stayed in the blue following the report of first-half profits that were up by 47%.
Unlike the future of Europe’s secondary cup competition, the Amlin Challenge Cup, the future of the sponsoring insurance firm is looking considerably more stable now it has side-stepped many of the issues that could have floored it in the last twelve months. Considering the weather and specifically the flooding that much of Europe has seen, the 23% increase in profits is impressive, and has subsequently convinced the markets to squeeze the share price higher by 6% over the course of the day.
G7 overlooked amidst Russia-Ukraine tensions
Under normal circumstances the quotes from today’s G7 statement would be closely followed for indications on future economic policies, however today has only seen reactionary comments following Russian troop movements over the weekend. With Europe and especially Germany being dependant on the flow of oil and gas from Russia through Ukraine, it is unlikely that commendation of Mr Putin’s actions will be as strong on this side of the Atlantic.
Although privately sentiment is likely to be equally from by the US and her European allies, publically Europe is likely to be considerably more circumspect with the rhetoric.
Gas and wheat see jump
The fact that two thirds of the EU’s Russian oil and gas is channelled through Ukraine has seen a squeeze on prices. By mid-afternoon Brent crude was up over $2.70, or 2.5%, and natural gas was up almost 2%.
The dramatic increase in energy prices however was nothing in comparison to the panic seen in the wheat market, with Ukraine being one of the world’s largest producers. Prices in London rose by 3% but in Chicago rose by almost 5%.
Rouble continues to weaken
The USD/RUB has reached levels last seen in 2008 as the Russian rouble continues to weaken, with the global focus on looming actions that the G7 might take against Russia following the deployment of troops in Ukraine.
The tail-end of last week saw the EUR/USD flirt with the 50-day moving average – subsequently the price has shot higher as the EU’s exposure to current uncertainties has been more factored in.