Markets Viewpoint: Crimean referendum – discounted by markets but nervousness remains The Crimean referendum delivered the expected result: A Yes to join Russia. Financial markets had already prepared themselves for this outcome during last week. Nervousness will remain in financial markets, and depending on political developments more safe-haven flows could materialise near term. Nevertheless, following recent risk-off price sessions and the fact that the referendum did not lead to any notable immediate violence, there may be space for an immediate relief in bond markets, and some short-covering in FX (CEE) early this week. Our baseline is that the conflict will not evolve to the level where tough trade/investment sanctions are imposed or even to the level where energy supplies are cut off from Russia to Europe. Therefore, we also believe that markets will revert to look at fundamentals within weeks. Early results showed an overwhelming 95.5% of those voting favoured joining Russia. The head of the referendum commission put the turnout at 83%, which looks high considering many had said they would not take part at all. The US and EU quickly repeated the referendum was illegal. President Obama had a call with Mr Putin, saying the Crimean vote took place under duress of Russian military intervention and would not be recognized, something Mr Putin disagreed with. Mr Obama added no diplomatic solution was possible in the midst of large-scale Russian military exercises on Ukraine’s borders, so no quick solutions are in sight. Likely sanctions on Russia to be soft Both the EU and the US consider the referendum “illegal and illegitimate” and have in advance threatened to impose sanctions on Russia. EU foreign ministers are scheduled to meet at 09:30 CET on Monday. They will probably decide on a first wave of – presumably rather soft – sanctions. These could include visa restrictions and the freeze of accounts of a defined group of persons, but probably not tougher trade sanctions. Russia could lose its G-8 status and planned German-Russian government consultations could be cancelled. The crisis will also be on top of on the agenda when EU heads of state and government meet on Thursday/Friday. Over the next weeks and possibly longer, the diplomatic conflict about Russia’s action in Ukraine is likely to linger on. The word “Ukraine” means “borderland” and that already explains the country’s inner conflicts. As an important transit country between the East and West, Ukraine is likely to remain in the headlines. The crisis could – and we stress the word COULD because we don’t know – spread to other parts of Ukraine and in a worst-case scenario to other post-soviet states in Central Asia. Various steps of escalation are possible. However, we still don’t consider an escalating trade war with Russia, stopping oil and gas exports as likely (see also our comment from 2 March). Upside risk to oil and gas prices cushioned by abundant inventories After a fall in prices Thursday, European Brent oil and natural gas prices regained lost territory Friday afternoon. The short term future fluctuations in oil and gas prices will to a large extent be dependent on the severity of the response by the EU and Ukraine to the outcome. In the short term, we expect that the movements in oil and gas prices will be cushioned by abundant supplies from high natural gas inventories and seasonally falling demand. That limits the macro implications for Europe for now... (NORDEA) (See more: https://nexus.nordea/?utm_source=Triggermail&utm_medium=email&utm_term=10%20Things%20Before%20the%20Opening%20Bell&utm_campaign=Post%20Blast%20%28moneygame%29%3A%2010%20Things%20You%20Need%20To%20Know%20Before%20The%20Opening%20Bell#/article/5201) [Today, 01:30 (updated today, 02:55) Aurelija Augulyte, Holger Sandte, Niels From, Thina Margrethe Saltvedt, Jan von Gerich Aurelija Augulyte, Holger Sandte, Niels From, Thina Margrethe Saltvedt, Jan von Gerich _]
Posted on: Mon, 17 Mar 2014 13:45:44 +0000
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