Bears are back, fear­ful of world events

Financial Mirror (Cyprus) - - FRONT PAGE -

Global stocks and in­dices are re­spond­ing to a week of dire geopo­lit­i­cal head­lines. At the end of the last trad­ing week, Euro­pean mar­kets were on their way down, fol­low­ing their Amer­i­can and Asian coun­ter­parts. The bears are now back in the pic­ture.

Last week, a Malaysian Air­lines pas­sen­ger plane was shot down over East­ern Ukraine, with Rus­sian and Ukrainian fac­tions blam­ing each other for the death of all 298 people on board. This hap­pened as Is­rael be­gan its ground in­va­sion on Gaza, hop­ing to put a stop to the rocket and tun­nel at­tacks of the ter­ror­ist group Ha­mas, and as the Is­lamic State con­tin­ued fight­ing across Iraq and Syria, now ex­pelling Chris­tians north­ern Iraqi town of Mo­sul.

The air dis­as­ter in­creased ten­sions that have been long bub­bling up and raised the prospect that the EU and US will im­pose yet fur­ther sanc­tions on Rus­sia, as they push for an end to the cri­sis. Al­though Rus­sian Pres­i­dent Putin has re­peat­edly de­nied his in­volve­ment in the fight­ing, US Pres­i­dent Obama has in­sisted that the civil war in Ukraine is fa­cil­i­tated by Rus­sian sup­ports for sep­a­ratists. Re­mem­ber that Rus­sia is Europe’s sin­gle largest en­ergy sup­plier and an im­por­tant trade part­ner. Com­bined with the un­cer­tainty in the Mid­dle East, which also threat­ens global sta­bil­ity, in­vestors started to sell off.

Euro­pean eq­ui­ties fell on Thurs­day, and by mid-morn­ing on Fri­day, Lon­don’s FTSE 100 was down 0.47%, the CAC sank 0.08% in Paris, and the DAX in Frankfurt lost 0.75%. The MICEX in Moscow was worst af­fected, down 1.32%, while the cur­rency, the ru­ble,


the lost value against the dol­lar and the euro. Ger­man 10-year bonds closed the week at a record low.

The Ukrainian crises doesn’t seem to be draw­ing to a near end. Mon­day’s re­ported as­sault by Ukrainian tanks on the re­bel­con­trolled Donetsk marked the first ma­jor vi­o­lent in­ci­dent since the air­liner was shot down, serv­ing as a fur­ther damp­ener on sen­ti­ment, and leading to calls for fur­ther sanc­tions. Travel and leisure in­dus­tries have also taken a wide hit; the longer the var­i­ous con­flicts con­tinue, the longer term the im­pact on tourism will be across East­ern Europe and the Mid­dle East.

Af­ter the Euro­pean mar­kets re­acted, the knock-on ef­fect was pre­dictably felt in Asia. As is com­mon dur­ing times of cri­sis, forex traders turned to the Ja­panese yen. Traders pushed up the cur­rency in Tokyo, thus push­ing down the value of the coun­try’s ex­port ori­en­tated com­pa­nies. As the yen surged against all of its ma­jor peers, gold also rose the most in 4 weeks with in­vestors keen to seek out the se­cu­rity that it of­fers.

For short term bi­nary op­tions traders, the present sit­u­a­tion af­fords a plethora of op­por­tu­ni­ties. The pol­i­tics be­hind scenes are far more com­pli­cated how­ever. As the US and other su­per­pow­ers press for peace­ful and demo­cratic so­lu­tions, it is hard to judge just how long fight­ing can and will con­tinue. In­deed the vo­latil­ity in the mar­kets re­flects the very fact that we can­not al­ways log­i­cally an­tic­i­pate the in­ten­tions and strate­gies of rebel groups. In­vestors will be best re­frain­ing from mak­ing long term cal­cu­la­tions just yet.

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