''After the week started in a state of panic about the prospects of war in the Ukraine, the investing environment has suddenly become much calmer again, even if stocks have opened a little lower in Europe. Not only has Russian President Vladimir Putin pulled back from the brink, but the first rounds of February economic data have been encouraging, with Europe’s services purchasing manager indexes leading the way earlier today. But we still have to deal with Friday’s U.S. jobs report, for which this upcoming ADP employment report will serve its usual role as an imperfect harbinger of what to expect.
The 150-point drop in the Dow on Monday was pretty alarming but yesterday’s 227-point rebound was impressive. It shows how resilient and willing to take a glass-half-view of the world investors will be while central banks have still got their back. The reality is that things are still dicey in the Ukraine and if Russia were to ratchet up military action, there’s not a lot of economic leverage that the West has to stop it. (MC)
UKRAINE: Although Russian President Vladimir Putin eased some fears of imminent military conflict in Ukraine on Tuesday, western governments confronted the practical difficulty of levying sanctions against Russia, whose size and economic entanglement with the rest of the world would make it difficult to isolate. Meanwhile, on the proactive side, the European Union is floating the idea of an 11-billion-euro aid package for Ukraine. With that awkward balance in place, and after their whipsaw action of the past couple of days, markets softened marginally from Tuesday’s rally, with European equities and the Russian ruble losing a bit of ground in early trading.
Investors are coming to the view that Ukraine represents a regional rather than globally systemic problem. That is just as well, since only a limited amount of leverage can be applied to Russia without inflicting economic pain on the rest of Europe, much of which is heavily dependent on Russian gas supplies. At the same time Ukrainian markets are modest and risks of losses that might be incurred by further political chaos falls most heavily on Russia''.
