NEW YORK/LONDON, June 25 (Reuters) – Waiting for the fallout from a mutiny in Russia that ended on Saturday, some investors expected a pullback to safe havens such as US Treasuries and the dollar when markets open later on Sunday.
Heavily armed Russian mercenaries led by Yevgeny Prigozhin, a former ally of President Vladimir Putin and founder of the Wagner Army, advanced most of the way to Moscow after capturing the city of Rostov, but then halted their advance, thus defusing a large one Challenge. On Saturday night they began withdrawing from the Rostov military headquarters they occupied, a Reuters witness said.
Financial markets have often been volatile since Russia invaded Ukraine in February 2022, causing disruptions in markets and global finance as banks and investors rushed to divest their exposure.
Following Saturday’s events, some investors said they were focused on the potential impact on safe havens such as US Treasuries and on commodity prices as Russia is a key energy supplier.
“It certainly remains to be seen what happens in the next day or two, but if uncertainty about Russia’s leadership persists, investors could flock to safe havens,” said Gennadiy Goldberg, head of US rates strategy at TD Securities in New York.
Goldberg said that despite the de-escalation, “potentially, investors may remain nervous about later instability and remain cautious.”
The action drew global attention and reignited an old fear in Washington about what would happen to Russia’s nuclear arsenal should there be a domestic uproar.
“Markets don’t typically respond well to emerging and uncertain events,” said Quincy Krosby, chief global strategist at LPL Financial, particularly in reference to Putin and Russia.
“As uncertainty escalates, government bonds will get a supply, gold will get a supply and the Japanese yen tends to gain in those situations,” Krosby said, noting typical safe havens that investors buy when risks rise.
Alastair Winter, Global Investment Strategist at Argyll Europe, said that while the de-escalation has meant markets may not react much now, “Putin has clearly been weakened and there will be further developments.”
He saw the US dollar “find some support as the market speculates again on rate hikes and cuts and a recession in various economies.”
Stocks have been mostly uptrend for the past few months, which some say could make stocks more vulnerable to a sell-off. Year-to-date, the S&P 500 (.SPX) is up 13%, although it has lost momentum in recent days amid interest rates in focus. Federal Reserve Chair Jerome Powell issued a statement last week announcing further rate hikes.
Some saw little reaction as the situation seemed relaxed. Rich Steinberg, chief market strategist at Colony Group in Boca Raton, Fla., said that “markets will treat this as another geopolitical risk” and that “some tense nerves have been calmed in the short term” by the de-escalation.
Reporting by Lananh Nguyen, Sinead Cruise, Megan Davies; writing by Megan Davies; Edited by David Gregorio
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