Russia’s creeping invasion into Ukraine has gotten a lot more explicit with as many as 10,000 Russian soldiers fighting in Ukraine, reports Anna Nemtsova for The Daily Beast, many of them fighting alongside the pro-Russian separatists that recently took control of the port city Novoazovsk in the southwest of the country. Russia has denied sending troops into the country, and according to RT (née Russia Today) thousands of Russian citizens have joined the separatist fighters, but hardly anyone outside of Russia is taking those claims seriously at this point.
Markets adjusting to Russia-Ukraine conflict
The markets have responded to growing crisis as you would expect as investors shift towards safer assets, though none of the movement is extreme at this point. The S&P 500 is down 0.39% in early trading, the Dow is down 0.53%, and the NASDAQ is down 0.39%. Even the Euro Stoxx 50, which would take a much heavier toll if full scale war were to break out, is only down 0.95%, and the euro has lost 0.19% against the dollar. Gold and oil are both up more than 0.7%, while US, UK and Japanese government bond prices have all moved up a bit in trading.
While each new development will continue to move the market, the gradual escalation has also given investors plenty of time to adjust fighting in Ukraine and more or less direct Russian involvement, so we aren’t seeing the kinds of big shocks that you would expect if the same story were taking investors by surprise. While the bad news has pulled the S&P 500 below the recent 2000 milestone, bulls will probably push it back past that level before long as long as the situation doesn’t keep escalating.
Antagonism between Russia and the West would be more worrying
NATO has acknowledged that Russian troops have moved into Ukraine, saying there are ‘well over 1000 troops’ operating in Ukraine, the FT reports, with an ‘offensive army’ of 20,000 troops on the Ukrainian border. So the big question is what happens when the proxy war fought through pro-Russian separatists turns into an open war between Ukraine and Russia. Comprehensive trade sanctions and retaliatory trade bans could threaten Europe’s weak recovery, and Russia may be betting that the EU won’t take that risk.