“Oversold stock markets have found some relief in the short-term, but prevailing risk off sentiment should gain the upper hand soon once the next development in the Russia-Ukraine crisis arrives.”

Indices recoup losses but bounce unlikely to last

“After the losses of Friday and Monday a bounce of some sort was to have been expected. Given how keyed up investors had been regarding the developments in eastern Europe, the lack of any full-on conflict in eastern Ukraine has provided the chance for markets to edge higher. Some short positions will have been closed out and some dip buyers might even be thinking about chancing their arm in the market after the recent losses. But such swift bounces are a feature of declining markets, and with further developments in the crisis inevitable, the likelihood is that a headline will come along sooner or later and prompt another leg lower.”

Gold and oil drop back for now

“Just as the rally in stocks is probably temporary, so today’s weakness in oil and gold is likely to be short-lived. Given how energy will be a key weapon in the sanctions battle now developing, it is probable that oil prices will recoup recent highs in short order. Meanwhile gold will be the classic safe haven, and another push towards $2000 looms. Given how quickly the crisis is developing, by the time the next FOMC meeting rolls around some of the committee are likely to be much more circumspect in calling for a swift tightening of policy, weakening the dollar and giving room for gold to keep rallying over the medium term.”

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