Crimean referendum to weigh on markets in Asia today

How markets react to the actuality that the Crimean’s have, unsurprisingly, voted on Union with Russia as opposed to the prospect of it will be revealed today and over the next few days. But whatever happens it is unlikely to reduce tensions.

Likewise the incursion of Russian troops over the weekend into Western Ukraine just outside Crimea shows how tense things are and how easily inflamed they may become. Key to remember here is that water and energy of Crimea come from Ukraine and the Russians may be in a mood to secure this, or at least try.

I find the moves in the Euro recently to be the most baffling moves I have seen in currency markets for a decade or more.

On the preipice of deflation, with a still moribund economic union and with a potential conflagration on its eastern borders the Euro just shrugs it off like a teenager saying “whatever!” and marches higher.

Of course it tells you as much as about the US dollar as it does about the Euro and perhaps about the Yen as the dominant currency trend as its moves seem to be reflected in Euro and US dollars via EuroYen.  But lets thing about Crimea and big bad Putin’s plans for the Ukraine.

My sense is that Putin’s gambit is not an underestimation of how much he has bitten off but a calculated push to see how much he can get away with before the West does something concrete. We know for a fact that he thinks the end to the Soviet Union was a travesty and we also know that he has grand plans for a Eurasian Union with Russia at its heart.

So the weekend push acroos the bridge from the Crimea into Ukraine was to me a feeling up exercise.

On that basis I want to own Euro and Stock market puts.

Anyway looking back to Friday it was another down day for US stocks with the Dow down 0.27% taking it’s losses for the week to more than 2%. The Nasdaq fell 0.36% while the S&P 500 lost 5 points to 1,841 for a loss of 0.29%. Worth noting is that consumer confidence released on Friday fell heavily to 79.9 versus the 82 the market expected.

In Europe the DAx managed, somehow, to rise on Friday up 0.42% but it was down 4% last week and is down something like 8% so far this month. Of course the German economy and German companies are the most exposed to these Russian shenanigans and Chancellor Merkel finally started talking tough on Friday to Putin. Elsewhere the FTSE fell 0.39%, the CAC dropped 0.8% while stocks in Madrid and Milan fell 1.39% and 1.19% respectively.

Locally on the ASX futures market the March SPI 200 contract was off 18 points to 5301 bid.

Is that a double top I see before me? target 5200.

On FX markets the Euro defies gravity and many other laws of nature by continuing to rise amidst the gloom of the European economy, continuing disinflation, potential deflation and proximity to the Ukrainian crisis. But rise it does and while it sits at 1.3893 this morning in very early Asian trade it pushed above 1.39 on Friday. GBP continued to stay strong as well and sits at 1.6632 and it seems the key here is that the US dollar is under pressure as USDJPY has fallen down to 101.31 and close to a big break lower.

The Aussie dollar did quite well last week buoyed by the employment report. Buyers keep coming in everytime it falls and while it is off from Friday’s 0.9027 close this morning at 0.9006 traders would rightly be wondering about the enduring strength of the Aussie dollar.

On commodity markets the IEA upgraded its energy use forecasts which helped Nymex crude rally 0.7% to $99 Bbl. But it is gold which continues to be the primary beneficiary of the uncertainty. Gold is at $1,382.30 Oz this morning. Copper is back at $3 lb while the Ags were very volatile with Corn down 2.48%, Soybeans off 1.06% while wheat rose 1.66%.

ON the data front today we have motor vehicles and then European CPI tonight which will be huge for the Euro (well, maybe if Euro traders care about fundamentals). In the US Empire State Manufacturing is out and the Tic flows will be watched closely after rumours of a $1oo billion+ seller of US Treasuries last week.

Have a great day, good hunting and Tin Hats on.

Greg