World markets have trembled via the major equity bourses with the news of growing instability coming from the Ukraine and Russia crisis. The airplane that was shot out of the sky will not calm investors nerves going into the weekend and world leaders will have to do their best to bring tranquillity to the situation. Whether that can be attained is a huge question as allegations are sure to be exchanged in the coming hours and days as the blame game is played.
While almost all major equity bourses in Asia have traded lower this morning and European exchanges are showing extreme nervousness, traders should remember that sudden bursts downwards are often followed by moments of reflection and the sensibility – and markets often bounce back upwards. Even though a crisis definitely exist, chaotic moments like these have a way of becoming more sedate as investors realize that things do not always get worse.
Through all the international news generating since Thursday evening, the EUR has traded without much volatility. The Single Currency continues to have support levels tested as the USD has been slightly stronger – but without a rollercoaster like ride. Traders should note that historically when crisis have erupted that the Greenback is frequently sited as a safe haven and going into the weekend this is likely to remain the case. The GBP has also traded near support levels and is experiencing some pressure. Having written this, it must be noted that like the equity markets even though both the Single Currency and Sterling have been taken slightly lower that investors are likely to look for a rebound from both FX pairs versus the USD at some point. Nothing has changed regarding Fed policy and while political instability is certain to have a short-term effect, meaning that the major currencies are likely to gain in value against the USD again.
It should be noted too that true to form the JPY got stronger in Asia today as traders followed their traditional tactics and increased risk appetite.
Gold is trading near 1313.00 USD as of this writing and the precious metal should be watched for volatility with any attempts at speculation. However, traders know that Gold has been in a bear market for a long time and the events from the past 24 hours are not going to change the overall sentiment unless inflation were to actually show up.
Housing data from the States proved disappointing yesterday and was not able to follow through after the better results from the previous month, putting a quick end to the ‘happy news’ from the U.S. housing sector and likely giving cynics additional fuel as they question the health of the U.S. economy.
The U.S. will see a Preliminary Consumer Sentiment report today via the University of Michigan, but data is unlikely to be a force in the broad market. It is news from the Ukraine and Russia that will worry the markets. Investors need to be alert today and this weekend and wisely consider short-term sentiment and risk management.