Escalating tensions in Ukraine roil global markets

AP and AFP

LONDON/HONG KONG–An escalation in tensions in the Ukrainian region of Crimea roiled global markets on Thursday.

As reports emerged that dozens of heavily armed pro-Russia gunmen have seized control of local government buildings in Crimea, stocks in Europe — and not just in Moscow and Kiev — took a pounding while the dollar and gold advanced. Investors are worried that the tensions in the strategically important peninsula may take the Ukrainian crisis into a new, more dangerous phase.

While Russia has raised questions over the legitimacy of the new Ukrainian authorities after President Viktor Yanukovych fled Kiev last week and has initiated surprise military drills, Ukraine has put its domestic security forces on high alert and urged Russian forces not to leave their base in southern Crimea.

Over the past couple of weeks, investors monitored developments in Ukraine with a degree of nonchalance. Now they are worrying that Russia may be drawn in. Geopolitical worries tend to prompt investors to search out the sanctuary of safe haven assets such as gold and the dollar.

In Europe, the main stock indexes, which had started the session flat, were trading sharply lower. Germany’s DAX was down 1.5 percent at 9,518, while Britain’s FTSE 100 fell 0.6 percent at 6,758. The CAC-40 in France was 0.7 percent lower at 4,368.

Unsurprisingly, markets in Ukraine and Russia were feeling the heat. Russia’s RTS stock index was down 2.1 percent while the Ukrainian currency, the hryvnia, briefly touched another record low against the dollar, at 11.25 per dollar

Wall Street was poised for a lower opening, too, with both Dow futures and the broader S&P futures down 0.3 percent.

While keeping an eye on developments in Ukraine, investors will also be monitoring comments later from the Federal Reserve chair Janet Yellen to the Senate’s Banking Committee. Stocks jumped on Feb. 11 when Yellen reassured Congress over the central bank’s market-friendly, low-interest rate policies.

In Asia, markets mostly rose on Thursday in cagey trade following a positive close on Wall Street and before the congressional testimony of U.S. Federal Reserve head Janet Yellen later in the day. Australia’s main index was hit by a slump in Qantas shares after the national carrier said it would slash 5,000 jobs under restructuring plans as it announced a half-year net loss of more than US$200 million. Shanghai added 0.30 percent, or 6.10 points, to close at 2,047.35 and Hong Kong rallied 1.74 percent, or 390.74 points, to 22,828.18. Seoul finished 0.39 percent higher, gaining 7.66 points to 1,978.43.