Wall Street Reacts to Putin: Nevermind, Nothing to See Here
The market’s freakout over the crisis in Ukraine? That’s so yesterday’s news.
The Dow Jones Industrial Average jumped 200 points Tuesday and the S&P 500 surged 1.3% to 1869, a new intraday record high. Tensions over Russian involvement in Ukraine eased after Russia’s defense minister ordered soldiers involved in combat-preparedness drills to return to their bases.
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As many investors anticipated, the rush to safety prompted by the developments over the weekend in Ukraine proved to be short-lived.
And now many analysts and strategists are looking ahead for the market’s next major catalyst, with many fixated on Friday’s jobs report.
Here’s a roundup of reactions to Tuesday’s stock rally and what’s next for Russia and Ukraine:
Peter Boockvar, managing director at The Lindsey Group: “Nevermind, it was just a military exercise. Repeating what I said yesterday that most geopolitical events are usually fleeting in its market impact, mattering just one day is pretty impressive and this Friday’s 4pm close will be most influenced by the US payroll number than anything else. Russia though now has to deal with the aftermath of its actions and will likely see a drop in FDI, a further taint in its reputation and Putin still knows he holds many cards in the geopolitical world with his energy business in particular as he said today “those who plan sanctions must think of consequences…sanctions against Russia would cause mutual damage.”…Putin even mentioned today the temporary nature politics has on markets. We’ll soon see how temporary it is for Russia. The euro is up modestly getting back not even half of yesterday’s selloff.”
Andrew Brenner, head of international fixed income at National Alliance Capital Markets: “The bond vigilantes are back. The difference is that they are in Russia. We think Putin took a look at the crushing blows the world gave to Russian debt and equities and decided he miscalculated. The bond vigilantes were the cause of Russia cancelling a bond auction, and the 10% drop in equities got everyone’s attention. We think that Angela Merkel had more influence on this than headlines give her credit for. Both spent a lot of time in the old East Germany.”
Kit Juckes, macro strategist at Société Générale: “No, of course it’s not ‘all over.’ The economic fallout, notably in Russia, will be significant and building political stability in the Ukraine remains a huge challenge. But financial markets are short-sighted animals and everything is calmer. Even the (very) overvalued Rouble is stronger today. And so, risk is a lot less ‘off’ than it was.
Adrian Miller, director of fixed income strategy at GMP Securities: “While many will speculate as to the reason behind Russia’s move to de-escalate it could be the realization that the West was lining up to deliver potentially debilitating economic sanctions and embargos…In other words, elf-interest and financing is mightier than the sword. And when push comes to shove, both on the part of Russia and the EU, much of the rhetoric going back and forth is just that, rhetoric and saber rattling, but that didn’t prevent the market from taking Russia at its word on Monday by selling off and then notably rebounding after troops were ordered back to base after military exercises were completed, which by the way Russia claims was not part of the Crimea situation.” |
