Crimea Vote to Dictate Equity Market Sentiment

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Crimea Vote to Dictate Equity Market Sentiment

Crimea is set to vote to secede from Ukraine in a referendum before the market opens on Monday. This should determine whether weekend gaps are likely to form in forex and equity markets, as the vote would make a crucial impact on overall market sentiment.

Bear in mind that if Crimea breaks away from Ukraine and joins Russia, the US and European Union would impose sanctions on Moscow. This would extend and exacerbate the ongoing tension in the region, with the potential of a larger-scale violence between military forces.

The Ukraine, US, and European Union have insisted that this Crimea referendum is illegal, but markets seem to have priced in expectations of secession. On Friday, US stocks closed significantly lower. The S&P500 and the Dow chalked up their largest weekly declines since the start of this year, as risk appetite has been generally weak in the past months.

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Equity Market Sentiment Outlook

The potential of further conflict in the region could keep risk-taking at bay, which doesn’t bode well for higher-yielding assets such as equities and futures. Traders might decide to move their money to the safe-haven US dollar or gold, while others might simply want to cash out their risky holdings and trigger a significant market selloff.

In addition, equity traders might be keen to limit their risk ahead of the week’s FOMC interest rate statement. Recall that Fed Chairperson Yellen recently mentioned that the slowdown in hiring and sales was merely a result of weather-related factors, and that the US economy will pick up pace sooner or later. The recent NFP report did prove just that and it will be interesting to see how she takes this latest development in stride. Hawkish remarks could still keep US equities afloat in the latter half of the weak while cautious comments could limit stock gains.

To contact the reporter of the story: Jonathan Millet at john@forexminute.com