Russia sanctions lead to soft start for Europe

Monday, July 28, 2014

European equity indices got off to a shaky start this week after threats of further European sanctions against Russia saw investors sell-off risk assets. After reaching an agreement on Friday, the European Union finalised its first economic sanctions against Russia. The MICEX shed 1.9% on Monday, extending Friday’s declines while the rouble traded above 35.50 against the dollar for the first time since early May as investors pulled funds from the country. With Germany’s finance minister Wolfgang Schaeuble stating that peace was a “top priority” the economic impact could be extensive, leading us to believe that there may be further downward pressure on Russian markets in the coming sessions.

The majority of benchmark stock indices in Europe closed lower after spending the majority of the session holding on tentatively to opening levels before swinging into negative territory towards the close as a weaker start to the US session commenced. At the time of writing, both the S&P 500 and DJIA were trailing between 0.2%-0.4% lower on the Russian sanctions and weaker than expected macro data. Pending home sales recorded a surprise fall, declining 1.1% in June against expectations of a 0.5% increase and while the Dallas Fed manufacturing activity index, Markit composite PMI and services PMI all came in broadly in line with expectations, the overall cautious mood was prompting some pull-back from market participants.

MICEX extends losses on sanction threats

INDEXCF Index MICEX Index Dai 2014 07 28 16 05 53

Rouble trades above 35.54 against the dollar

RUB Curncy Russian Ruble SPOT 2014 07 28 16 08 13

Topics: Equities, PMI, RUB
More from: Kash Kamal