Global Stock Markets Roiled by Fears of Escalation in Ukraine


LONDON -- Fears that the crisis in Ukraine is escalating into a new and dangerous phase roiled financial markets Wednesday.

Following allegations of a buildup of Russian troops on the border of Ukraine and the prospect of tit-for-tat sanctions between the West and Moscow, investors have become increasingly vexed by the situation in Ukraine.

The latest jitters, which contributed to a 1.1 percent fall in Japan's Nikkei 225 stock average earlier and a 1 percent decline in the Stoxx 50 index of leading European shares, have come in the wake of comments from Polish Prime Minister Donald Tusk that he has information indicating that there is a growing threat of a "direct intervention" by Russia in Ukraine. Less febrile selling in the U.S. following a big down day on Tuesday- the S&P 500 index was down only 0.2 percent in early trading -helped calm the mood as the day progressed.

Tusk's comments come a day after John Ging, director of U.N. humanitarian operations, warned the Security Council at an emergency meeting requested by Russia that the humanitarian situation in eastern Ukraine is steadily worsening as power and water supplies are scarce, homes are destroyed and health workers flee.

The fear in the markets is that Russia may use these reports of a humanitarian crisis to justify a military incursion, which would clearly ratchet up tensions with the West.

"This is the biggest fear for investors right now and explains why we're seeing more risk aversion in the markets today," said Craig Erlam, market analyst at Alpari.

Stocks weren't the only financial assets that were being affected by the concerns over Ukraine. As is often the case at times of geopolitical stress, supposedly safe haven assets such as gold, U.S. Treasurys and German bonds have been in demand.

An ounce of gold has risen $22 to $1,307 while the yields on the benchmark U.S. 10-year Treasury and German bund have fallen 0.03 percentage point to 2.45 percent and 1.10 percent, respectively.

However realistic the concerns of a Russian invasion are, investors are also getting vexed by fears that the sanctions imposed on Russia by the European Union and the United States could impact economically on both sides.

Europe stands to lose the most from any escalation given its big trading relationship with Russia. Already, European businesses that have ties with Russia's financial, military and energy sectors stand to lose out from the sanctions.

Even those that don't have direct links to those sanctioned sectors are cautioning over the outlook. German sportswear company Adidas, for example, recently expressed worries over the impact on its business.

So far, European companies appear to be bearing up, though analysts fear it won't take much of an increase in tensions between the West and Russia to start crimping the recovery.

"Loss of export revenues is the most obvious channel, but there may also be damage to business confidence given the heightened uncertainty," James Ashley, chief European economist at RBC Markets.

Russia already appears to be preparing retaliatory sanctions against the EU. On Tuesday, there was widespread speculation that Moscow was preparing measures to close the airspace over Siberia to European flights heading to Asia.

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Will someone please explain why the Ukraine mess has any thing to do with Wall Street? What do we trade with Ukraine, a neighbor of Russia? I don't get it, some one farts in a foreign country and depending on the smell the market goes up or down. The war in Gaza had no effect yet the Ukraine does? My advice: "Beware of the Street".

August 06 2014 at 5:18 PM Report abuse rate up rate down Reply

Gold is going up so I may get a chance to sell my wedding ring!!! and stock up on beans

August 06 2014 at 4:29 PM Report abuse rate up rate down Reply

I saw Mr Armstrong of AOL on the business news this morning but I was disapointed he didn't mention my ancestors.

August 06 2014 at 12:11 PM Report abuse -1 rate up rate down Reply

And what did the US stock market do during WWII when the German U Boats sat off the East Coast firing at the Merchant Marine? The U boats weren't too far from Wall St.

August 06 2014 at 12:00 PM Report abuse -1 rate up rate down Reply
1 reply to Iselin007's comment

Damn those Germans !

August 06 2014 at 4:29 PM Report abuse rate up rate down Reply

Right, this is not a surprise.
In other news the trade deficit narrowed due to exports of oil. Say what! So now their hiding the job loss from the trade deals by shifting the focus from people to using oil to narrow the deficit and drive GDP! Folks I think America wants the 8 + million factory jobs that was lost, not fancy deficit tricks.

August 06 2014 at 11:48 AM Report abuse -1 rate up rate down Reply

Yes Ebola will get us all just like the walking dead virus. Go to church this Sunday can't hurt

August 06 2014 at 11:33 AM Report abuse rate up rate down Reply
1 reply to SPQR's comment

Must be a scattered brain plan to push up the stocks of the Medical Industry and push up Health care costs.

August 06 2014 at 12:03 PM Report abuse -1 rate up rate down Reply

Where did the rebels get their tanks? China? US? the Soviets? France ? We are going to keep doing this crap and one day we will all be dead. No matter how much money you have it won't make any difference!

August 06 2014 at 11:26 AM Report abuse -1 rate up rate down Reply

If Putin invades the Ukraine I am selling everything and leaving for Mars !!!! I am also going to stock up on beans!!!

August 06 2014 at 11:23 AM Report abuse -1 rate up rate down Reply

Didn't know that a trading arena had a mind.

August 06 2014 at 10:34 AM Report abuse rate up rate down Reply
1 reply to jdykbpl45's comment

The trading arena has super fast computers.

August 06 2014 at 12:14 PM Report abuse rate up rate down Reply