The Russian president has recognised Donetsk and Luhansk as independent entities. This is a move that is expected to pave the way for Russia to claim any move in the area is support for an independent region rather than an invasion of Ukraine. So far the response from the West is unclear, but the EU said sanctions would be on the table if those regions were recognized. Putin also denied he would be meeting with President Biden, a summit that was in doubt as it was contingent on no action from Russia.
Putin’s announcement paved the way for Russia to openly send troops and weapons to the long-running conflict pitting Ukrainian forces against Moscow-backed rebels.
- The US expects Russian troops could soon move into Donbas, a senior US official familiar with latest intelligence said.
- The US and UK plan to impose sanctions against Russia, with several other countries saying Monday they were prepared to do the same, including Japan, Australia and Lithuania.
- The Ukraine ambassador to the UN said at a hastily arranged emergency meeting of the UN Security Council yesterday that the decision to recognize pro-Moscow regions was “illegal and illegitimate”.
US Stock markets crashed into close (US100 -1.8% and USA500 -1.2% lower). The GER30 dove -2.07%, while the UK100 dropped -0.39%. Asian markets slumped with the Nikkei falling -0.78%, with the CSI off -0.36%. Russia’s benchmark MOEX cratered -10.5%. USD was steady and gold — the traditional haven during upheavals — held gains. The Ruble wavered. Gold rallied to test $1914, while Oil prices have dropped back from session highs, but remain markedly higher on the day, at 94.67. European equity futures shed more than 1.5%. Yields widened again but remain elevated. Treasuries climbed, taking the US 10-year yield below 1.90%.
European Open – The March 10-year Bund future is up 49 ticks, and US futures are outperforming as investors head for safety while keeping a close eye on the developing situation in east Ukraine. The standoff between the West and Russia will keep pressure on stock markets, which already sold off yesterday and are set to correct even more today. DAX and FTSE 100 futures are currently down -1.1% and -0.7% respectively, while a -1.977% decline in the NASDAQ is leading US futures lower. In FX markets the Yen was supported by safe haven flows and USDJPY dropped back to 114.68. EUR and GBP sold off, leaving EURUSD at 1.1304 and Cable at 1.3586. Oil prices have dropped back from session highs, but remain markedly higher on the day, with WTI at USD 94.67 at the moment.
Today – Ukraine tensions will remain in focus and likely overshadow the calendar, which includes German Ifo readings as well as the UK industrial trends survey, UK public finance data and US PMI & Consumer Confidence.
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Andria Pichidi
Market Analyst
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