Quotes: Russia turmoil to fuel market volatility, flight to safety

L1

24/06/2023 23:17

(Adds quotes from two strategists paragraphs 3-7)
       June 24 (Reuters) - 
    Heavily armed Russian mercenaries who advanced most of the
way to Moscow 
    began turning back
     on Saturday, de-escalating a major challenge to President
Vladimir Putin's grip on power, in a move their leader said
would avoid bloodshed.
  
        
  
Here are reactions from investors and analysts:  
 
ALASTAIR WINTER, GLOBAL INVESTMENT STRATEGIST AT ARGYLL EUROPE:

    “Uncertainty over various bad outcomes in Russia, as this
looks like, means a stronger USD and possibly JPY now that Japan
seems to be back in favor."
  
    
Short-term U.S. Treasuries "should pull back some of their
recent losses relating to the Fed delaying further cutting
rates. Global equities were wilting last week over stagflation
worries and the news from Russia will not change that, even if
it may not make much difference to most corporate earnings.
There is not a lot of good news around.”  
    
    “I suspect markets may not react much at all now. However,
Putin has clearly been weakened and there will be more
developments. USD will certainly find some support as the market
returns to speculating over rate hikes and cuts and recession in
different economies.”
  
        
  
    RICH STEINBERG, CHIEF MARKET STRATEGIST, THE COLONY GROUP,
BOCA RATON, FLORIDA:
  

    "Some frayed nerves were calmed in the short run" by the
de-escalation, and "the markets will kind of treat this as
another geopolitical risk." Safe haven assets may not react
because Wagner forces did not reach Moscow and inflame the
situation, he said.
  
        
  
    "Calmer nerves have at least prevailed for the moment. This
is a fluid situation but I definitely think the heat has been
dialed down by Putin."
  
        
  
STEVE SOSNICK, CHIEF STRATEGIST AT INTERACTIVE BROKERS:

"This is a truly exogenous event that leads to initial shock and
a flight to safety. It should awaken VIX from its stupor. First
move is likely to be a bump in government bond prices (lower
yields) and USD. Riskier assets tend to decline. The question is
how much and how lasting the reaction will be, much of which
depends upon unknowable developments."

"Even with Russian embargoes, they still sell plenty of raw
materials to sympathetic nations like China and matter to the
global supply. It is reasonable to expect oil and other key
commodity prices to rise. If oil prices rise sharply, that will
indeed weigh upon equities and reignite stagflation fears. Gold
is tough to read. In theory it should benefit from a flight to
safety, but in practice a strong dollar can impede it." 
    
"U.S. treasuries should rise on the safety trade."

"With Russia largely disconnected from the global economy, few
U.S. or European companies will have direct impacts from
instability in a country that’s already a pariah. So the broader
markets will take their cues from bonds and commodities.
Defense-related stocks should catch a bid - the world is not a
safer place today - and commodity-linked stocks should also be
outperformers for the reasons stated above."

MICHAEL PURVES, CEO AT TALLBACKEN CAPITAL ADVISORS:

“Certain parts of the stock market have been flying really high,
we do know that’s largely been driven by P/E expansion rather
than earnings and this might give people an excuse to sell.”

“These types of geopolitical shocks are often short lived and
usually don’t have much impact on the U.S. stock market but this
time it may because stocks have run up so high.”
    
“Any time you have these kinds of political disturbances in a
commodity nation you at least expect a short term shock to the
prices of the commodities produced there.”
    
“We should start seeing classic risk off dynamics on Sunday
night such as global equity futures lower, crude oil higher,
treasury prices higher.”
    
DAVID KOTOK, CHIEF INVESTMENT OFFICER AT CUMBERLAND ADVISORS IN
SARASOTA, FLORIDA:

“This is a potential civil war in Russia. Important implications
as Putin is already weakened by events and now faces existential
threat as does his antagonist."

“Turmoil effects include the price and availability of Russian
energy. Geopolitical impact on Russian alliances like Belarus
and nearby countries in Soviet sphere. In EU what does Hungary
(Orban) or NATO ally Turkey do.

“Regardless of the outcome, this is already a very big deal."  

“Initial market reaction will be driven by news reports and by
any concrete events. That is usually true of most rapidly
changing event sequences. The strategic damage is already done. 
Every capital in the Russian alliance of countries and in the
adversaries’ alliance and in the neutral alliance is rethinking
the relationship with Putin." 
    
GEORGE BOUBOURAS, HEAD OF RESEARCH AT K2 ASSET MANAGEMENT IN
MELBOURNE:
    
“Current reported Russian events are not helpful. It’s very
concerning for the complex geopolitical global landscape and any
uncertainty will obviously impact markets."
    
"Higher vol lies ahead. However fundamentals will eventually
resurface. That is, economies in developed markets remain
resilient & central banks concerns’ with stubborn inflation
creates many challenges as rates need to go higher & remain
higher for longer.”
    
JAMIE HALSE, WHO MANAGES AN A$500 BILLION JAPAN-FOCUSED FUND AT
PLATINUM ASSET MANAGEMENT IN SYDNEY:
“If Putin removed, pure speculation and a hypothetical on my
part, troops withdrawn from Ukraine and peace deal agreed, then
that would be bullish for Russian-exposed businesses, Eastern
Europe stocks, probably Chinese stocks by implication. Bearish
energy, resources and defense stocks."
“Probably bearish Indian stocks too as the dividend they’ve
received from cheap Russian oil likely disappears."
“On the other hand, civil war, especially if prolonged, in a
major nuclear armed nation should make anyone
uncomfortable…(though) we don’t really know what’s going on at
this point. Civil war may be too long a bow to draw.”

 (Reporting by Tom Westbrook in Singapore, Megan Davies,
Carolina Mandl and Ira Iosebashvili in New York, Sinead Cruise
in New York; Writing by Lananh Nguyen; Editing by Daniel Wallis)
 ((Lananh.Nguyen@thomsonreuters.com; +1 (646) 696 4829;))