Despite grim PMIs on the continent and risk-off around the globe on inflation worries, the euro and global stocks have been pressured of late with the resurgence of geopolitical worries stemming from the Ukraine crisis.
The news that Russian President Vladimir Putin moved to add 300,000 new troops to shore up the country’s flagging war on Ukraine and threatened to use nuclear weapons sent markets into a tailspin last week and there is little let-up in the latest headlines surrounding the debacle. However, the headlines are mixed and sactions remain the West’s weapon despite the threat of nucear conflict.
Ukraine Pres Zelenskiy was last heard saying that maybe ”Putin’s nuclear threats were a bluff, but now, it could be a reality” as per a CBS interview.
Meanwhile, the United States warned of “catastrophic consequences” if Moscow were to use nuclear weapons in Ukraine after Russia’s Foreign Minister said regions holding widely-criticized referendums would get full protection if annexed by Moscow.
Indeed, the Financial Times wrote, ”according to few western officials, any potential Russia’s nuclear strike against Ukraine would be unlikely to spark a retaliation in kind but would instead trigger conventional military responses from western states to punish Russia.”
Nat Sec Adviser Sullivan said that ”US privately and at a very high level informed Russia that any use of nuclear weapons would lead to catastrophic consequences for Russia because the US and its allies will give a decisive response.”
Reuters reports that ”votes in four eastern Ukrainian regions, aimed at annexing territory Russia has taken by force mostly since its invasion in February, were staged for a third day on Sunday. The Russian parliament could move to formalize the annexation within days.”
Prime Minister Liz Truss said Britain and its allies should not be listening to Russian President Vladimir Putin’s “sabre-rattling” on Ukraine after he ordered a partial mobilisation of troops and raised the possibility of nuclear conflict, as Reuters reports:
“We should not be listening to his sabre-rattling and his bogus threats. Instead, what we need to do is continue to put sanctions on Russia and continue to support the Ukrainians,” Truss told CNN in an interview broadcast on Sunday
As for markets, the US dollar, as measured by the ICE dollar index was reaching a high of 113.228 on Friday as bond yields touched the highest since 2010. The yield on the US 10-year note hit a high of 3.829% while the euro consequently fell for a fourth straight day, down 1.5% to $0.9686 for the close, 10 pips above the low of the day scored after data showed the downturn in the German economy worsened in September. The pound made another 37-year low of 1.0834.