Volatility is the only thing that appears to be certain in the markets right now, as European stocks pare losses to even sneak into positive territory on the day while US futures now eye only a small decline after the bank holiday weekend.
The old adage goes that the market hates uncertainty and while that has clearly been evident at times over the last couple of weeks, there’s no doubt that investors continue to be tempted back in at the slightest hint of diplomacy winning the day. Even after the events of the last 24 hours and all of the rhetoric that’s accompanied it, there remains hope.
Russia still claims to desire a diplomatic solution to the crisis in Ukraine, despite being the catalyst for the latest escalation when recognising the independence of two separatist regions. That decision has invited a barrage of criticism and sanctions will follow today which will no doubt damage diplomatic efforts that appeared to be making headway earlier this week.
Of course, while the latest developments look like a precursor to an invasion – and may well be just that – they could also be deliberate attempts to add further urgency to the situation and force people into serious negotiations. As it stands, investors appear to be hoping this is the case and as long as Russia continues to seek a diplomatic solution and troops remain on the right side of the border, interest in the dips will remain.
As the crisis deepens though, we will continue to see risks being priced in accordingly, and nowhere is that more evident than in Russian assets and the oil and gas markets. The move by Germany to halt certification of Nord Stream 2 following the events of the last 24 hours is not entirely surprising but does block what would have otherwise been one passage to alleviating pressures in the gas market in the coming months.
Bitcoin suffers in risk-averse trade
Bitcoin is seeing some reprieve today after falling more than 15% since last Thursday. Risk aversion has weighed heavily on the cryptocurrency and in the absence of a significant improvement in Ukraine, we could see further pressure on it and other risk assets. With bitcoin back below USD 40,000, the focus switches back to recent notable levels, including USD 36,250 – where it has seen support today – and USD 33,000. But the big level remains USD 30,000 which has been key for many months.
For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/
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