The Wall Street Journal reports,"the escalating crisis in Ukraine has sent a chill through global markets.
U.S. stock futures slumped around 1% as the the situation in Ukraine worsened over the weekend. Ukrainian Prime Minister Arseniy Yatsenyuk said Sunday that his country was “on the brink of disaster.” He personally blamed Russian President Vladimir Putin for bringing the two nations to the verge of war.
Additionally, the U.S. and its European allies vowed Sunday to isolate Russian President Vladimir Putin and punish his nation’s economy, demanding he withdraw what they called an occupation force from Ukraine’s Crimean region''.
“The fear of an open and prolonged confrontation between Russia and the western nations will likely continue to weigh on general investor sentiment,” Barclays forex strategists wrote to clients over the weekend.
Commodity markets surged on the news. Russia is one of the world’s largest producers of oil, and traders worry supply may be disrupted if the Ukraine conflict escalates further.
He noted that geopolitical flare ups over the past couple of years have had minor influences on financial markets. U.S. stocks were undaunted by the Arab Spring and the Libyan civil war. “The use of chemical weapons in the Syrian civil war also sparked a brief selloff, which was quickly forgotten,” he said.
But there are reasons to believe U.S. markets may not be so quick to brush off the latest overseas tumult. “The repercussions of the Syrian crisis are sure to be felt in the emerging crisis in the Crimea region of Ukraine,” Mr. O’Rourke chief market strategist at Jones Trading. said. ”The manner in which the Russian President ran roughshod over U.S. foreign policy regarding Syria will make dealing with this current crisis an even greater challenge.”
The circumstances in the Ukraine are fluid and it is still too early to tell how they will impact markets in the longer term.
Until Friday, U.S. stocks had largely been numb to the developments in the Ukraine. In fact, the S&P 500 set a new record closing high on Friday – its 48th over the past 12 months. But the rally lost steam that afternoon after headlines crossed that Russian forces had seized control of two airports in Crimea. The Dow Jones Industrial Average notched a 172-point peak-to-trough swing after lunchtime before finishing the day higher.
Still, many market participants say the volatility prompted by Ukraine’s crisis will ultimately prove to be short-lived.
“This is a geopolitical issue of great significance, but we would expect its impact on the financial markets to be limited and short-lived,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co., said in a note to clients on Sunday.
