Ukraine Crisis Drives the Markets

03/04/2014 11:00 am EST


Jim Jubak

Founder and Editor,

The crisis in the Ukraine has escalated to include the threat of armed combat, and the global markets reacted as expected yesterday, writes MoneyShow's Jim Jubak, who cites some examples, along with offering his prediction as to how long this crisis may last.

Gold and energy commodities were up yesterday. So were safe haven currencies, such as the yen.

The Russian ruble was down. So was the euro and emerging market currencies, and markets took a licking.

Pretty much what you'd expect when the crisis in the Ukraine has escalated to include a threat of armed conflict between Russian and Ukrainian soldiers.

The biggest move was in the share prices of energy companies that might benefit if natural gas prices soar due to a cut-off in gas exports from Russia across the Ukraine, and into Western Europe.

For example, shares of Norwegian oil and gas producer Statoil (STO) were up 2.35% yesterday, as of 2:00 PM New York time.

Shares of energy companies without any near-term way to take advantage of any stoppage were off, with Chesapeake Energy (CHK) down 1.2% and France's Total (TOT) off 2.31%.

The oil benchmark price of the West Texas Intermediate climbed 1.77%. The Brent benchmark rose 1.6%.

Most of the moves I saw yesterday weren't specific to the crisis, but instead, were examples of the standard response of traders to heightened risk. For example, the safe haven yen rose to 101.4 to the US dollar. The euro was off 0.43% against the dollar. Gold was up 2.15%. The iShares MSCI Emerging Markets ETF (EEM) was down 1.89%.

The ruble was the big crisis's specific loser, down 1.4% yesterday, against a basket of currencies—despite an increase in benchmark interest rates from the Russian central bank. That continued the Russian currency's slide in 2014. The ruble is now down more than 10% for 2014.

The slow response of US and EuroZone diplomats to the crisis, with lots of talking and not much action (not necessarily a bad thing if the alternative is shoot first and talk later), suggests that this crisis will drag on for a while. An “emergency” meeting of EuroZone leaders isn't scheduled to take place until Thursday, March 6.

Full disclosure: I don't own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund may or may not now own positions in any stock mentioned in this post. The fund did own shares of Chesapeake Energy and Statoil as of the end of December. For a full list of the stocks in the fund see the fund's portfolio here.

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