Russian President Putin ended massive army maneuvers near the Ukrainian border this morning, which relieved the panic in global markets. Stocks rallied, while safe haven assets gave up most of their gains from yesterday. The dollar, yen, Swiss franc, oil, bonds, and gold are all lower this morning, as bargain hunters cruise the equity markets.
Putin may have eased the pressure on Ukraine because Russian markets could hardly stand another day like Monday, where the Russian stocks dropped 11% and erased $60 billion in market cap in the space of a few hours. The Russian central bank spent $12 billion trying to save the rouble, and it still dropped to the lowest level since Russia went into sovereign default in 1998. Russia is threatening the West if it follows through with economic sanctions, but the Russian economy would collapse long before the pain in Europe caused sanctions to ease.
Putin claims that he can legally invade eastern Ukraine, as he has been asked for assistance by ousted Ukrainian President Viktor Yanukovych (who is now hiding in Moscow.) Russia considers Yanukovych the lawful President of Ukraine, despite his being stripped of his powers by the Ukrainian Parliament. The Russian Parliament has already voted to give Putin the authority to invade Ukraine to protect the Russian-speaking minority there, and to secure the Russian Black Sea Fleet base in Sevestapol in the Crimea.
Russian troops with insignia cut off their uniforms still control the Crimea, where they have taken over Ukrainian military bases and government buildings. Putin still pretends that these troops are local militia, despite them all having the same uniforms and weapons. This morning, these “not Russian” troops fired over the heads of 300 unarmed Ukrainian Air Force personnel who were trying to re-enter their airbase at Belbek that they had been forced from at gunpoint over the weekend.
Palladium is sharply higher this morning, riding a rocket in early New York trading. Russia is the world’s major supplier of palladium, and economic sanctions will choke off that supply. Platinum, which dropped with gold and silver overnight, has almost recovered back to yesterday’s close. Extended strikes in South Africa’s platinum mining sector are into their sixth week, with the labor union refusing to budge on their demands of massive pay raises. Above-ground ore stocks at the mines are dwindling, and Implats has declared force majeur on delivery contracts due after the end of March. At 10am, gold is $13 lower from Monday’s close, and silver is 24 cents lower.