On Monday as tensions seemed to escalate, with rumours of deadlines for a Ukrainian surrender of warships in the Crimean region. Investors sought safe havens for assets, the precious metal was bid, reaching multi-month highs trading up to $1350/oz, in the currency markets Swiss Franc and the Japanese Yen strengthened, with the Russian Ruble and Ukrainian Hryvnia reaching all-time lows.
The Russian central bank intervened in the markets due to the weakening Ruble, and hiked interest rates by 150bps, in an attempt to curb flows. However the Russian economy is still relatively weak and the hike in rates will stifle the limited growth.
This morning these flows have begun to reverse, with spot Gold off from the highs by around $15 with no escalation, and seemingly unfounded rumours of a request of surrender.
Commodities Supply Disruption
Crude Oil and Natural Gas jumped on concerns of potential supply disruption if there is a further military action or economic sanctions are put in place by the West over Russian occupation of the Ukrainian Crimea region. Russia exports a significant proportion of Natural Gas to Europe, with major pipelines passing through the Ukraine. Analysts have attempted to cover the different potential scenarios that could play out from here. This focuses on a disruption of supply, however it has been a relatively warm winter, leaving excess stockpiles of Natural Gas available. Economic sanctions are a likely method to of force that Western governments will follow, as the appetite for a war with a global power doesn’t seem on the cards. The Russian MICEX market cap has fallen $58.4bn Friday, as investors sought safer assets. However the substantial movement has been seen as a buying opportunity this morning, the index is currently up 3.39%
The situation is being watched closely for any escalation, provocation or change in the current situation of an uneasy stalemate.
Russia MICEX index sees its market capitalisation down $58.4 bln in one day - more than the $51 bln or so Moscow spent on Sochi Olympics— Lidia Kelly (@LidKelly) March 3, 2014