Ukrainian unrest supports safe havens and energy prices higher

Monday, March 03, 2014

Japanese stock markets edged lower during overnight trading as investors sought out safe havens amid continued unrest in the Ukraine. The Nikkei closed 1.27% lower while the TOPIX lost 1.23% and the Hang Seng erased 1.43% off its value as investors retreated from equities, favouring the yen which strengthened further against the dollar for the third consecutive session towards 101.30. Chinese equity markets managed to build on Friday’s gains as the CSI 300 and Shanghai Composite rallied 0.52% 0.92% higher respectively, encouraged higher by an expanding services PMI figure which came in at 55 in February from 53.4 the previous month. Markets also gained some support from the final Markit PMI reading that was in line with expectations of 48.5 in February which was also slightly higher than the preliminary figure of 48.2.

Tensions in Ukraine have supported commodity benchmarks higher on concerns that the escalating unrest may curb energy supplies. Front month Brent futures have rallied to their highest levels since the start of the year as prices rose as much as 2.0% in early morning trade. After a sharp sell off towards the end of February, front month natural gas futures traded on NYMEX have increased almost 2.5% this morning after Ukraine mobilised forces in response to the increasing presence of Russian troops in Crimea.

The Russian central bank increased interest rates in a surprise move this morning, reacting to the escalating inflationary pressures which has seen the rouble weaken towards 37.00 against the dollar, losing almost 12% of its value since the start of the year. The currency has experienced rapid deterioration over the past few sessions as investors withdraw from Russia amid speculation that continued intervention in Ukraine could lead to international financial sanctions. The benchmark interest rate was increased from 5.5% to 7% with the central bank citing increased volatility and the emergence of risks for inflation as the primary drivers for the move.  

Gold prices were supported higher as demand from risk averse investors spiked, pushing the yellow metal to a four month high as it looked to test levels towards $1,350 later today. Gold prices have rallied 12% year-to-date as resurgent physical buying from Asia and macro uncertainty support the retracement after last year’s heavy selling off.

With a steady flow of economic data due out today markets will have no shortage of catalysts, however, investors may be distracted by the headlines dominating major newswires as unrest in the Ukraine shows no signs of a swift resolution.

Gold prices rally to a four month high as investors seek out safe havens

XAU Curncy Gold Spot Oz 2014 03 03 07 46 15

NYMEX front month nat gas prices recover after February's heavy sell-off

NG1 Comdty Generic 1St NG Fut 2014 03 03 07 45 49

Front month Brent prices rally above $111/bbl on supply concerns

CO1 Comdty Generic 1St CO Fut 2014 03 03 07 46 05

RUB weakens against the dollar as investors pull funds from Russian equities

RUB Curncy Russian Ruble SPOT 2014 03 03 08 04 11

Events for today

0200

CN

Feb

HSBC Manufacturing PMI

0800

UK

Feb

Halifax House Prices

0855

DE

Feb

Manufacturing PMI

0900

EZ

Feb

Manufacturing PMI

0930

UK

Feb

Manufacturing PMI

1330

US

Jan

PCE & Personal Income

1500

US

Feb

ISM Manufacturing

1500

US

Jan

Construction Spending

 All times UK Local Time

Economic Market Calendar

Topics: Equities, Gold, Energy, Brent, JPY, RUB
More from: Kash Kamal