Markets appear on track to reverse Monday’s sell-off, with investors getting confident that the issue was unlikely to escalate beyond Crimea. President Putin’s announcement today of sending Russian troops in Crimea back into barracks is adding to the calming effect.
The market’s reaction today is in-line with my call yesterday that the issue will soon blow over. The key point here is the distinction between Crimea, a historically Russian territory that is home to the country’s Black Sea fleet, and Ukraine proper.
The market’s Monday reaction reflected the fear that Russia would do to Ukraine proper, particularly in the eastern part of the country, what it had done in Crimea. But escalating the conflict into Ukraine’s borders was going to be problematic for Russia’s business interests, as the country’s natural gas exports to Europe flow through pipelines in Ukraine. Bottom line, Ukraine remains a geopolitical issue, but investors are looking past it.
In corporate news, Radio Shack (RSH) are in a free fall after the company posted a big loss and announced reducing its store count by a fifth. Auto parts retailer AutoZone (AZO) came out with better than expected quarterly results this morning and Tesla Motors (TSLA) is announcing plans to expand in Europe by adding more Superchargers, service centers and stores.