Russia’s military attack on Ukraine sends stocks and cryptocurrencies lower while boosting crude oil, gold, and other commodities.
Russian Military Action in Ukraine
Russian President Vladimir Putin announced a military operation in the separatist Donbass region of Ukraine shortly before 6am local time. The following hours saw Russian air strikes throughout much of Ukraine, with explosions reportedly heard in Kiev, Mariopol, and Odessa, although early reports of a Russian troop landing in Odessa turned out to be false. At the time of writing, Russian air strikes are taking place across Ukraine, with air raid sirens sounding in many localities. There are also reports of Russian ground troops advancing.
The Ukrainian government has declared martial law, vowed to resist Russia by military means, and called for outside assistance.
Western nations including the United States have strongly condemned the Russian attack and promised severe economic sanctions against Russia.
As Russia is a permanent member (and current Chair) of the United Nations Security Council, there will be no concerted international consequences, nor can Ukraine expect any material assistance possibly excepting some limited weapons supply. NATO nations bordering Ukraine are on high alert, with some declaring states of emergency, but will not get involved if Russian forces do not operate beyond Ukrainian borders.
Russia is already claiming it has achieved air supremacy over Ukrainian air space, which is now completely closed to civilian traffic. The Ukrainian military is severely outgunned by Russian forces but may be able to hold up a Russian advance on the ground with anti-tank and anti-vehicle capabilities. The Ukrainian military has claimed it has already shot down six Russian aircraft and inflicted casualties on Russian ground forces.
President Putin has stated that he does not want to occupy Ukraine. It is likely that the true goal of the Russian government is to install a more compliant government in Ukraine which will accept certain Russian dictates and refrain from seeking NATO membership.
Market Reaction to Russian Invasion
US markets have not opened yet, but futures trading and the opening of markets in Europe since the Russian action began paint a clear and stark picture:
- WTI Crude Oil is up by 5.84%, reaching a 7-year high above $98 per barrel.
- Gold is up by 1.74% to trade at a 1-year high near $1,950 per ounce.
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- The S&P 500 Index is 1.93% lower, reaching its lowest level since May 2021. The Index will almost certainly make a “death cross” (SMA 50 dropping below SMA 200) within the next two weeks.
- European stock markets have opened sharply lower, with the DAX currently trading 3.54% below its close yesterday.
- All major cryptocurrencies are between 3% and 5% lower.
- In the Forex market, the Japanese Yen and US Dollar are strong, while the Australian and New Zealand Dollars are weak.
- Several agricultural commodities which have been powering to new highs lately can be expected to open firmly up later today, notably Wheat which is a major Ukrainian export. Corn and Soybeans can also be expected to open much higher.
What Does This Mean for Traders?
Sadly, crisis events such as the outbreak of war tend to produce excellent opportunities for traders and speculators as the often cause massive price movements which tend to trend. The current situation is no exception, as it is certainly moving markets. However, traders should remember that volatility can get very high, and prices can snap back suddenly.
It is likely that traders will have opportunities to do some long commodity trading as outlined above, while more experienced traders may also want to short major stock market indices and major cryptocurrencies such as Bitcoin or Ethereum. Traders should generally not expect technical levels to be respected in this environment.
Forex traders may want to short the Russian ruble, but it is likely most brokers will freeze trading in this currency for the short-term future.