Russians gave the Ukrainians up until 11:00am (Singapore time) on 4 March 2014 to surrender Crimea. There were reports that 16,000 Russian troops have entered or joined already stationed troops in Crimea and surrounded Ukrainian army bases in the region as the Sevastopol Bay saw Russian warships entering the mouth of the port and passing freely into the Russian navy base.
Global reactions to Russia’s invasion
US Secretary of State, John Kerry, travelled to Kiev in support of the new Ukrainian leadership. In response to Russia’s 'brazen act of aggression' the US has cancelled travel for diplomats, threatened sanctions on trade and banking; it has even kicked Russia out of the G-8. Europe, however, has yet to really push Russia on its current military program; with many high-level meetings taking place around the globe, questions are being asked as to what actions Europe will take.
Europe’s modest response is being hotly debated, but it is clear that most believe it is due to gas supplies. One third of Europe’s gas and oil comes from Russia — most of which is piped through Ukraine.
Market movements over the past 24 hours
Global markets have taken a hammering; overnight (Monday) the S&P 500 fell by as much as 1.3%, with European markets being the hardest hit with the DAX -3.4% or -333 points, as the FTSE shed 104 points.
In an attempt to stabilise Russian money markets, the Russian central bank raised rates overnight by 150 basis points to 7%. The RUB sank to new lows against the EUR, USD and CHF as the Micex (the main index of Russia), saw 13.5% of its value wiped off in one-day.
Gazprom, which is the state-controlled Russian gas supplier to Western Europe — took one of the biggest hit on the Micex, and Brent and the WTI both jumped up 2% overnight.
Russian 10-year bonds rose to 9% from 8.1% on Friday’s close and will likely see even more pressure as sanctions are stepped up and foreign investors shed the state’s bonds in droves. So far this year, the Micex is down 23% (globally the worst performer) and the Ukrainian market is only down 8.9%.
Key markets to watch in the short term
The approaching deadline will no doubt see volatility increase in global markets. Markets to watch include gold, Brent Crude, USD/RUB and European stock markets. Increased volatility will see risk coming off the table.
There has been good buying of gold as traders hedge geo-political risks; they will be keen to see if the spot level can test the downtrend drawn from the October 2012 high at $1363. Momentum clearly favours a test of this level in the short term, with the five-day moving average pulling away from the ten-day and the MACD on the daily chart firmly above zero. If long, traders will most likely stay long.
Volatility has picked up in the energy complex and we saw that in the price action of oil-related stocks, with solid gains seen in names like OSH and STO. April Brent traded in a range of $112.39 to $109.29, but failed to hold the intraday highs and sellers came in fairly aggressively. The bulls will want to see a break and close above the December 4 high of $113.00. Negative divergence between price and the RSI was seen on the daily chart.
The Russian ruble has fallen to a record low against the euro and the dollar as investors turned to safe-havens. The amount of RUBs in Paris, London, Berlin and beyond is ginormous; a potential banking and funding freeze in response to Russia’s invasion will see these funds being seized and frozen in the respective markets. Russia could see its action starving itself from the inside out.
Trade a range of global markets as CFDs
We have seen increased volatility in response to the heightened tensions in Ukraine. As CFDs give you the ability to go long or short (buy or sell), our clients have been trading the downtrend of RUB/USD, plus a range of commodities, including spot gold and Brent crude.
You can keep up-to-date with the unfolding situation in the Ukraine via our market insight section — it’s just another way we ensure you have the edge.
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