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Markets React Calmly to Crimea Vote Markets Shrug Off Crimea Vote
(about 1 hour later)
PARIS — Global financial markets on Monday mostly shrugged off the anticipated Russian annexation of Crimea, as stocks, currencies and energy futures all traded calmly. PARIS — Global financial markets on Monday ignored the anticipated Russian annexation of Crimea, as stocks rose strongly on Wall Street and in Europe, and currencies and energy futures traded calmly.
Almost 97 percent of voters in Crimea, a historically Russian-speaking area of Ukraine, on Sunday backed union with Russia, despite warnings from the United States and European Union that a referendum would lead to sanctions against top Russian officials, including those close to President Vladimir V. Putin.Almost 97 percent of voters in Crimea, a historically Russian-speaking area of Ukraine, on Sunday backed union with Russia, despite warnings from the United States and European Union that a referendum would lead to sanctions against top Russian officials, including those close to President Vladimir V. Putin.
The adoption of sanctions on “about 20 people” announced Monday by European Union foreign ministers “are already priced in by the markets,” Mujtaba Rahman, Europe director for Eurasia Group, wrote in a research note. “The market is now in a holding pattern, looking at whether we get further incursions by Russia into Ukraine proper. It’s all about Putin and his next chess move.”The adoption of sanctions on “about 20 people” announced Monday by European Union foreign ministers “are already priced in by the markets,” Mujtaba Rahman, Europe director for Eurasia Group, wrote in a research note. “The market is now in a holding pattern, looking at whether we get further incursions by Russia into Ukraine proper. It’s all about Putin and his next chess move.”
In afternoon trading, the Euro Stoxx 50 index, a barometer of euro zone blue chips, had risen 1.2 percent, while the FTSE 100 index in London had gained 0.9 percent. As Wall Street opened, the Standard & Poor’s 500-stock index rose 0.81 percent, the Dow Jones industrial average added 0.87 percent and the Nasdaq composite index was up almost 1 percent. In afternoon trading, the Euro Stoxx 50 index, a barometer of euro zone blue chips, had risen 1.2 percent, while the FTSE 100 index in London had gained 0.9 percent. The Standard & Poor’s 500-stock index and the Dow Jones industrial average were up about 1 percent in early trading, after a government report showed factory production had risen in February.
Russia’s Micex index was up 2.5 percent, and the dollar was trading at 36.33 rubles, down 0.8 percent.Russia’s Micex index was up 2.5 percent, and the dollar was trading at 36.33 rubles, down 0.8 percent.
Investors are closely watching for indications that Russia’s oligarch class is moving its billions of dollars in savings — money the country’s most wealthy have in recent years invested in things like trophy real estate in London, Paris and New York, as well as in financial assets in Western Europe and the United States. The calm market conditions on Monday suggested that there was no fire sale taking place. Investors are closely watching for indications that Russia’s oligarch class is moving its billions of dollars in savings — money the country’s most wealthy have in recent years invested in things like real estate in London, Paris and New York, as well as in financial assets in Western Europe and the United States. The calm market conditions on Monday suggested that there was no fire sale taking place.
Still, some investors said it appeared that the ruble was holding up relatively well only because of currency market intervention by the Bank of Russia, the central bank. The Bank of Russia did not immediately respond to requests for comment. Some investors said it appeared that the ruble was holding up relatively well, but only because of currency market intervention by the Bank of Russia, the central bank.
“Any news that suggests the conflict will escalate, with stronger sanctions from the U.S. and the E.U. could have a permanent effect on the ruble,” Ulrich Leuchtmann, head of foreign exchange research at Commerzbank in Frankfurt, said. Vladimir Bragin, head of research at Alfa Capital in Moscow, said it appeared that the central bank had spent about $500 million on Monday to support the ruble, after large-scale market intervention last week.
Mr. Leuchtmann said, “We’re seeing Russian-based investors trying to transfer assets out of Russia,” something that probably had contributed to the relative strength in developed-nation financial markets on Monday. He said that investors’ nerves — stretched last week in the buildup to the referendum — appeared to have been calmed by the outcome of the vote, and that it now looked “impossible” for Crimea to return to Ukraine.
“Markets actually have some optimism about the situation,” Mr. Bragin said. “There’s no panic on the Russian market.”
However, he said that if Russia were to invade Ukraine proper, it would be “catastrophic for markets.”
Ulrich Leuchtmann, head of foreign exchange research at Commerzbank in Frankfurt, said that any news that suggests the conflict will escalate “with stronger sanctions from the U.S. and the E.U. could have a permanent effect on the ruble.”
“We’re seeing Russian-based investors trying to transfer assets out of Russia,” something that probably had contributed to the strength in developed-nation financial markets on Monday, Mr. Leuchtmann said.
He said it was impossible to tell how much money had moved since the pace of capital flight from Russia picked up at the end of 2013, but that it was clear from talk in the market that the pace was picking up.He said it was impossible to tell how much money had moved since the pace of capital flight from Russia picked up at the end of 2013, but that it was clear from talk in the market that the pace was picking up.
In Washington, the White House announced that President Obama had signed an executive order imposing sanctions on Russian officials the United States believed to be responsible for the crises in Crimea and Ukraine.
Analysts said the current level of sanctions, which single out top Russian officials, are symbolically important but would have only a very limited effect on the Russian economy. But, they said, if Western governments escalated sanctions to a level that left Russian businesses unable to function normally in the international financial system, there would be a very serious impact on the country’s economy.
European energy markets were not overly concerned about the possibility of interruptions of natural gas flows from Russia to Europe. British natural gas prices were down about 1.5 percent on Monday.European energy markets were not overly concerned about the possibility of interruptions of natural gas flows from Russia to Europe. British natural gas prices were down about 1.5 percent on Monday.
Trevor Sikorski, an analyst at the London-based research firm Energy Aspects, said traders were reassured by the presence of large amounts of stored gas in Europe because of the warm winter. He also said that the outcome of Sunday’s Crimea vote “was expected and therefore does not change much the perception of the likelihood of a gas supply disruption.” Trevor Sikorski, an analyst at the London-based research firm Energy Aspects, said traders were reassured by the presence of large amounts of stored gas in Europe because of the warm winter. He also said that the outcome of the vote in Crimea on Sunday “was expected and therefore does not change much the perception of the likelihood of a gas supply disruption.”
United States crude oil futures were trading at $98.65 a barrel, down 0.2 percent.United States crude oil futures were trading at $98.65 a barrel, down 0.2 percent.
The dollar gained slightly against most major currencies. The dollar gained 0.4 percent against the Japanese currency from its levels late Friday in New York, to 101.74 yen. The euro slipped 0.2 percent to $1.3942.The dollar gained slightly against most major currencies. The dollar gained 0.4 percent against the Japanese currency from its levels late Friday in New York, to 101.74 yen. The euro slipped 0.2 percent to $1.3942.
Asian shares were mixed, with the Tokyo benchmark Nikkei 225 stock average falling 0.4 percent and the Shanghai composite index gaining nearly 1 percent.Asian shares were mixed, with the Tokyo benchmark Nikkei 225 stock average falling 0.4 percent and the Shanghai composite index gaining nearly 1 percent.
The bond market, often the first place where anxieties appear, was also calm, with the benchmark United States 10-year Treasury trading to yield 2.67 percent, little changed from last week. Comex gold futures were essentially unchanged.The bond market, often the first place where anxieties appear, was also calm, with the benchmark United States 10-year Treasury trading to yield 2.67 percent, little changed from last week. Comex gold futures were essentially unchanged.
Mr. Rahman of Eurasia group said investors would remain cautious as the drama in Ukraine unfolds. He said the referendum Sunday paved the way for Russia to “annex Crimea within a month.” Mr. Rahman of Eurasia group said investors would remain cautious as the situation in Ukraine unfolds. He said the referendum Sunday paved the way for Russia to “annex Crimea within a month.”
After incorporating Crimea, Mr. Rahman said, Mr. Putin will then seek to influence Ukraine by undermining the Kiev government’s authority in the eastern part of the country, though he said there remained about a 40 percent chance that Russia would invade Ukraine proper.After incorporating Crimea, Mr. Rahman said, Mr. Putin will then seek to influence Ukraine by undermining the Kiev government’s authority in the eastern part of the country, though he said there remained about a 40 percent chance that Russia would invade Ukraine proper.