Stocks and other risky investments, including battered Russian assets, rallied yesterday after Russia’s president said he saw no need to use military force in Crimea for now, remarks investors saw as intended to ease tensions over Ukraine.
President Vladimir Putin delivered a robust defense of Russia’s actions in Crimea, but he also sought to ease East-West tension over fears of war in the former Soviet republic. His comments reversed most of the markets’ moves on Monday.
The rouble rose 1.2 per cent to 36.05 to the dollar as Russian stocks jumped 5.3 per cent, recouping almost half of the previous day’s losses.
Putin told a news conference that Russia’s use of force in Ukraine would be a choice of “last resort” and that sanctions being considered against Moscow by the West would be counter-productive.
Putin’s remarks did not quell criticism from US President Barack Obama, who said Russia’s aggression in Ukraine is not a sign of strength. US Secretary of State John Kerry, who was in Kiev, said Moscow was looking for a pretext to invade further into its neighbour.
As investors moved back into stocks, they unwound safe-haven positions in gold, yen and US and German government debt. Oil prices fell as Putin’s gesture reduced the chances that energy supply from Russia, the No. 2 world oil exporter, could be disrupted or subject to sanctions.
“In the short term, the market always over-reacts,” said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh. “We got marginally good news today, but we don’t know what’s going to happen tomorrow.”
Forrest said she expects volatility to return to the market as the situation in Ukraine remains fluid.
Despite uncertainties over Putin’s next move and how the United States and Europe will respond, Wall Street stocks surged, outpacing Monday’s losses as the benchmark S&P 500 index booked a new intra-day high.
European stocks also rose, with the pan-European FTSEurofirst 300 index closing at 1,344.83, up two per cent, making up more than half of Monday’s drop and staging its biggest one-day gain in nine months.
MSCI’s all-country world stocks index, which tracks stocks in 45 countries, rose 1.2 per cent to 410.05.
On Wall Street, the Dow Jones industrial average jumped 218.11 points or 1.35 per cent, to 16,386.14, the S&P 500 gained 26.21 points or 1.42 per cent, to 1,871.94 and the Nasdaq Composite added 75.689 points or 1.77 per cent, to 4,352.99.