The Asian session was risky, equating to a rally in stocks and a weak Yen, down against the Dollar at the time of writing, to fresh lows in the 115.70s.
(USD/JPY M15 chart)
Russia’s Defense Ministry released footage on Tuesday to demonstrate it was returning some troops to base after drills, however, US President Joe Biden said the US had not verified the move. Russia’s claim that it withdrew its troops “would be good, but we haven’t verified that yet,” Biden said. “Indeed, our analysts indicate that they remain very much in a threat position.”
Biden also said the United States “is not looking for a direct confrontation with Russia,” but that if Russia attacks Americans in Ukraine, “we will respond forcefully.” Nonetheless, risk appetite had already improved in New York trading and Biden’s hawkish rhetoric did little to sway the consensus in the markets that diplomacy can prevail.
Stocks around the world rebounded on the reports, with the MSCI Global Equity Gauge finishing up 1.34%. US stocks snapped a three-day losing streak and the S&P 500 gained 1.6% to 4,471.07, the Nasdaq Composite added 2.5% to 14,139.76 and the Dow Jones Industrial Average jumped 1.2% to 34,988.84. Asian stocks also rallied with Japan’s benchmark Nikkei stock average rising 2.0% midday Wednesday while the broader Topix climbed 1.43% to 1,942.16.
Looking ahead, markets can take comfort in the fact that Putin has said he does not want war and will rely on negotiations in his efforts to eliminate any chance that Ukraine could ever join. NATO. However, at the same time, he did not commit to a full troop withdrawal. Putin warns that Russia’s next moves in the stalemate will depend on how the situation develops.
Ukraine has also expressed skepticism about Russian statements regarding a withdrawal. “We will not believe when we hear, we will believe when we see. When we see the troops withdrawing, we will believe in de-escalation,” Ukrainian Foreign Minister Dmytro Kuleba said.
NATO Secretary General Jens Stoltenberg said that “so far we have seen … no signs of a reduction in the Russian military presence on Ukraine’s borders,” adding that the alliance wants to see a “significant and lasting withdrawal” of forces, troops and heavy equipment.
US President Biden said: “Let there be no doubt: if Russia makes this breach by invading Ukraine, responsible nations around the world will not hesitate to respond.”
European markets will act on news related to headlines that may or may not show real evidence of a reduction in Russian military presence on Ukraine’s borders, with the latter being a catalyst for even more risk.