LONDON, Feb 22 (Reuters) – Inventory markets tumbled on Tuesday whereas bonds and commodities rallied after Russian President Vladimir Putin ordered troops into the breakaway areas of jap Ukraine. read more
Beneath is response from analysts and asset managers to the most recent occasions:
CHARLES HENRY MONCHAU, CHIEF INVESTMENT OFFICER AT BANK SYZ, GENEVA (through e mail)
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“Our core situation on this disaster is for tensions to remain elevated however a full-scale battle being averted. We proceed to view this because the most certainly situation.”
“We don’t see any cause to panic at this stage. Whereas most western media feedback sound alarming, we’d truly get near “peak concern” on this disaster and there’s a excessive likelihood that tensions will begin to abate from right here on. However, the worst case situation (full scale battle) can nonetheless occur. As such, we’re maintaining some safety in place (e.g Gold) and can chorus so as to add Russian belongings at this stage (though they’re beginning to look very enticing from a valuation perspective).”
“These developments don’t change our present portfolio positioning. It has been our view that fairness and credit score markets are extra in danger from the struggle on inflation than on a possible invasion of Ukraine. Till we get extra readability on the inflation outlook, volatility is more likely to stay elevated and shares may need to undergo extra corrective phases.”
“Because the begin of 2022, we’ve got had a constructive allocation to fairness markets however with some portfolio safety in place (lookback put-spread choices) and publicity to broad-based commodities and gold. The latest heightened danger stage triggered a modest de-risking of the portfolios (decreased fairness between 3% and 4% in balanced portfolios). However, we’ve got saved a constructive publicity to world equities.”
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK
“It simply prolongs the uncertainties which are available in the market. These uncertainties imply adverse sentiment and so even constructive information is simply placed on the again burner comparable to, this morning, we bought earnings from House Depot.”
“The underside line is that concern issue stays elevated and till we get some form of a clearer image of what Putin could or could not do, the market is simply going to remain in a state of confusion and risky.”
“And with the worth of oil surging, that provides to markets uncertainties, as a result of the opposite query is, how is the Fed going to cope with this? If oil costs proceed to rise and go above $100 and keep there for sustained time period which means you are going to have even greater inflation.”
“We have now to get by way of this geopolitical downside and get extra readability from the Fed. So till these issues occur, within the brief time period we’re simply going to be in a state of flux the place the market goes to commerce with excessive volatility, and never doing a lot of something.”
ELSA LIGNOS, GLOBAL HEAD OF FX STRATEGY, RBC CAPITAL MARKETS
“The short-term market response will rely upon the extent of sanctions imposed by the West. Western leaders have two choices – a ‘modest’ strategy, attempting to sign de-escalation (what markets ‘need’ to see) or a firmer strategy, recognising that permitting Putin to dismantle Ukraine piece by piece will nonetheless obtain his finish objective, over an extended timeframe.
“EU ambassadors are assembly right now to debate their plan for sanctions…The U.S. response might be extra vital. This boils down as to if that is termed ‘an invasion’ or not. Blinken continues to be scheduled to fulfill Lavrov in Geneva on Thursday.”
MARK HAEFELE, CHIEF INVESTMENT OFFICER, UBS GLOBAL WEALTH MANAGEMENT
“Whereas we consider it’s too early to make a closing evaluation on what Monday’s occasions could imply for the course of occasions, we stay of the view that the extreme danger case we described earlier — together with preventing and a protracted interruption of Russian power exports — nonetheless represents a tail danger at this stage.
“Allocations to commodities and power shares are a sexy possibility to assist traders hedge portfolio dangers. Power costs would probably rise within the occasion of an escalation round Ukraine, in addition to if cooler heads prevail amid rising demand and considerably constrained provide.”
DUBRAVKO LAKOS-BUJAS, CHIEF EQUITY MARKETS STRATEGIST, JPMORGAN
“Whereas the trail of Russia-Ukraine disaster stays unclear with probably elevated market volatility within the short-term, tightening financial coverage, in our view, nonetheless stays the important thing danger for equities as central banks try to aggressively re-anchor inflation expectations decrease.
“Overly restrictive financial coverage might end in an outright coverage error particularly if the enterprise cycle continues to deteriorate. On the identical time, the Russia/Ukraine disaster might power a reassessment of the Fed tightening path leading to central banks turning much less hawkish, whereas policymakers could think about further fiscal stimulus.”
LEE HARDMANN, CURRENCY ANALUST, MUFG BANK
“The developments have supplied a significant blow for any remaining hopes for final minute diplomatic resolution to keep away from battle within the Ukraine, which can absolutely be even more durable to keep away from now after Russia selected to blatantly disregard the Minsk settlement.
“There may be now a considerably greater danger that tensions will proceed to escalate within the area triggering a sharper sell-off for the rouble and inserting extra downward strain on different European currencies, that ought to increase the relative attraction of the U.S. greenback.”
SEAN DARBY, GLOBAL EQUITY STRATEGIST, JEFFERIES
“While the escalation in tensions is unwelcome, it’s unlikely to change world financial variables that a lot.
“The preliminary response to President Putin’s declaration was a direct risk-off with oil costs spiking. Our sense is that a part of the fairness transfer was a miscalculation over the sooner Russian troop withdrawal. Russia’s financial system is itself robust with document FX reserves, indicators of inflation peaking (Jan. 8.7%), its highest present account ever and debt-to-GDP ~20%.
“The Ukrainian foreign money has been beneath strain not too long ago, whereas authorities bond yields have spiked however to not the extent seen throughout the annexation of Crimea.”
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Reporting by Reuters Finance & Markets staff, compiled by Karin Strohecker, and Alden Bentley, modifying by Sujata Rao
Our Requirements: The Thomson Reuters Trust Principles.