Markets roll over as Putin lays down the gauntlet: ‘Ball is now firmly in NATO’s court’
Reports of a possible summit between US President Biden, and Russian President Vladimir Putin saw European markets get off to a decent start to the week initially.
Unfortunately, the early optimism didn’t last, and the France inspired initiative soon went the way of every previous initiative in trying to understand exactly what it is Russia wants from its current strategy.
“As a result of the Kremlin pushing back on the near-term prospect of a meeting, European markets subsequently rolled over and finished in negative territory as separatist forces in the Donbas and Luhansk regions of eastern Ukraine attempted to provoke Ukrainian army forces into action against them,” commented Michael Hewson, chief market analyst at CMC Markets UK in London.
In a further sign that Russia appears uninterested in arriving at a diplomatic solution, Vladimir Putin said that Russia would recognise the rebel forces sovereignty over the disputed regions, thus validating their claims to be self-governing.
“This in turn gives him the cover he needs to invade Ukrainian territory in support of the rebel forces, which he has ordered Russian troops to do to perform a “peacekeeping” role,” Hewson said.
“Putting to one side that any move would be in breach of international law; it also blows a hole in the Minsk ceasefire accords and make any chance of an imminent de-escalation even more difficult than it is now,” he added.
Putin went on to claim that the decision to admit Ukraine to NATO had already been taken and that further expansion was only a matter of time.
Last night’s speech certainly makes that prospect much more likely and not less. He went on to say that Ukrainian forces should stop their actions against the separatist regions immediately.
“After last night’s laying down of the gauntlet by Putin, the ball is now firmly in NATO’s court, with the very real prospect that sanctions may not be enough, although they will be very much the starting point, as Europe stands on what could be the brink of war.”
Analyst Michael Hewson
“If NATO, the US, UK and more importantly EU nations can’t coalesce around a significant and wide-ranging sanctions response, and in the case of NATO, draw a definitive line in the sand, in the wake of last night’s events, then you must wonder what would prompt them to, as dictators rarely stop if you appease them,” he continued.
Oil prices have reacted accordingly, with Brent prices pushing back up towards last week’s high, on the way to the $100 a barrel level which now seems only a matter of time.
Gold prices have also rallied back above $1,900 as it quickly becomes apparent that Russia appears uninterested in any outcome other than the one it wants.
“With US markets closed yesterday, today’s market price action is likely to be spicy to say the least with European markets set to open sharply lower, as the drumbeat of war gets ever louder,” Hewson concluded.