Russia-Ukraine relations sours further, stocks slump
The relationship between Russia and Ukraine has gone from bad to worse as it appears that Moscow is calling for the recognition of two pro-Russian regions in Ukraine. Since the Crimea crisis came to the fore in 2014, there has been an ongoing conflict in pockets of Eastern Ukraine, and now the Russian government wants the districts to be recognised as independent regions. The standoff between Russia and Ukraine is moving away from a narrative about a potential invasion to one where pro-Russian enclaves essentially declare independence from Ukraine. It is unlikely this will not go down well with the government in Kiev, but on the other hand, it might be a short-term solution to dodge an outright invasion.
Continental stock markets are under major pressure as the German economy relies heavily on natural gas from Russia, so the latest political wrangling has given sentiment another bruising. The DAX and the CAC are down 1.6% and 1.8% respectively. In London, the FTSE 100 is only 0.2% lower due to a healthy performance in the pharma and banking sectors. At the start of today’s session, the mood in Europe was upbeat as President Biden stated he would meet with Russia’s Vladimir Putin, if Russia didn’t invade Ukraine.
It has been another volatile session for EUR/USD as the latest development in the Russia-Ukraine story weighed on the currency pair, but in the past few hours, the euro has rebounded versus the US dollar. Unsurprisingly, WTI and Brent crude are up over 1.4% due to the rumblings in Eastern Europe. Overnight, gold printed a new 8-month high, but since then it has retreated and is now trading just below the $1,900 mark.
