Ukraine: A Pause

Markets rallying on hints out of Russia that Military force would be a "last resort" in Ukraine.  I saw this via Business Insider.com reposting comments from Kit Juckes from SocGen today that does a pretty good job of explaining where we are right now:

"…..Tensions in the Ukraine and Crimea have (temporarily) been eased. Russian troops have finished their ‘military exercise' and financial market tension is melting away. And no, of course it's not ‘all over'. The economic fallout, notably in Russia, will be significant and building political stability in the Ukraine remains a huge challenge. But financial markets are short-sighted animals and everything is calmer. Even the (very) overvalued Rouble is stronger today. And so, risk is a lot less ‘off' than it was……"*

I like the fact that somebody has put the word "temporary" in today's rally.  I'm  of the opinion that there will still be one more shoe to drop in this crisis and the markets will have higher volatility as a result in the next few weeks.  But unless there's an unlooked for event that changes the dynamic of the  affair, it's likely markets will look through this in the coming weeks.

The map above which also comes to us by way of Business Insider.com shows the ethnic divisions in Ukraine.  These are the reasons that I still think the price for Ukraine leaving the Russian sphere will be either real or de facto loss of territory.  But the outlines of the end game should be apparent soon and markets will sniff that out long before the rest of us do.  

*Link:  Business Insider.com: Markets are Rallying Everywhere on Hints of Russian De-Escalation.