VIX Still High But Stocks Focus on Good News From Ukraine

U.S. stock index futures were higher on Monday, indicating that Friday’s sharp rally could continue as it appeared less likely that the tense situation between Russia and Ukraine would escalate.

The S&P 500 and Dow on Friday posted their best day since March on news that Russia was ending military drills near the Ukrainian border, a move that was seen as indicating Russia would not send troops into Ukraine anytime soon. European shares rose more than 1 percent on Monday.

With earnings season nearly over, market action is likely to see an outsized influence from geopolitical issues, especially from the Middle East due to the region’s impact on the commodities markets.

 
The United States recently launched air strikes in Iraq targeting Islamic State fighters marching on the country’s Kurdish capital. The U.S. is also pushing for a new Iraq government, which Prime Minister Nuri al-Maliki has been battling to prevent, deploying forces across Baghdad as some parliamentary allies sought a replacement.

In the Middle East, Israel and the Palestinians agreed on Sunday to an Egyptian proposal for a new 72-hour ceasefire in Gaza.

The CBOE Volatility index has been at relatively elevated levels of late, closing above 15 every day this month. While 15 is well below the VIX’s long-term average of 20, it follows a multi-month period where the so-called “fear index” rarely closed above 13.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza