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Euro and Equities Remains Strong as Putin Reassures West

Posted by Joseph Trevisani on Mar 18, 2014 2:38:00 PM

The bland response of the United States and Europe to the Russian takeover of Crimea has reassured the currency and equity markets that there will likely be no economic or financial dislocation from the secession of the Black Sea peninsula from Ukraine or from the intended Russian annexation.

European equities had their second positive day in a row with the FTSE 100, DAX, CAC 40, Ibex 35 all posting gains. Asian exchanges in Japan, China India and Hong Kong advanced as well. The three major American indexes were half a percent or more higher as of this post. The Russian Micex Index has soared 13 percent  since Friday's close.

Today’s 1.3880-1.3943 euro range was barely different than yesterday’s, 1.3979-1.3948. The same was true for the dollar/yen, 3/17--101.24-87, 3/18--101.28-94 and euro/yen 3/17-- 140.84-141.98, 3/18-- 140.74-141.96.

Gold futures fell as low as $1350 today after reaching $1392 yesterday, the highest the metal has been since September 9th.  West Texas Intermediate crude and Brent slumped to  five week low as markets priced in little economic impact on oil prices  from the limited U.S and EU reaction to the Russian aecsssion . 

The U.S has placed limited  sanctions on the personal finances and travel of seven Russian and four Ukrainian nationals and the European Union has sanctioned twenty-one individuals.

Russian President Vladimir Putin said “We don't want a division of Ukraine; we don't need that," in a speech televised live from the Kremlin after Mr. Putin signed a treaty with Crimean officials annexing Crimea to Russia. "In people's hearts and minds, Crimea has always been an integral part of Russia," said Mr. Putin.  

Crimea authorities reported that 97% of voters had favored leaving Ukraine and joining Russia in Sunday’s referendum.

Positive U.S. housing data and benign inflation point to a continuation of the Fed's reduction in quantitative easing purchases in tomorrow’s FOMC statement. Most traders and analysts expect another $10 billion cut in monthly securities purchases to $55 billion and for the program to cease by year's end.

Europe is heavily dependent on Russian gas and oil exports and Russia needs the earnings of its energy sector to remain solvent. Neither side has an incentive to disrupt this exchange. Markets are clearly anticipating a quick return to normal business and politics.

Despite the dramatic events of the past two weeks, markets forecast no impact on the economic life of Europe, Russia or the United States. 

It remains to be seen if the same will be true for Crimea and the Ukraine.

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: WWM Alpha Trader, Bloomberg

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