Global Markets Turn Cautious on UKraine Tensions

Nichole Harper
28 Aug, 2014
New York City

Rising tensions between Russia and Ukraine dragged market sentiment across Atlantic. U.S. indexes have advanced in 11 of the past 14 trading days. However, investors have stayed on sidelines in recent days.

[R]12:20 PM New York – Rising tensions between Russia and Ukraine dragged market sentiment across Atlantic. U.S. indexes have advanced in 11 of the past 14 trading days. However, investors have stayed on sidelines in recent days.[/R]

Stocks on Wall Street opened lower after tensions rose between Ukraine and Russia and second quarter GDP growth was revised higher to 4.2%.

U.S. stocks declined after Ukraine’s president said Russia has “de facto” invaded his nation and blamed Moscow for directing and supporting rebels.

Ukraine’s president Petro Poroshenko called an emergency security meeting to sharpen the focus against rebels and a surprise third front of attack from rebels that NATO defense forces deem supported by Russia.

The border town of Novoazovsk and regions in south-east are under the control of Russian forces and rebels, Ukraine’s security and defense council said today.

U.S. and European investors are increasingly worried that additional and tougher sanctions on Russia may have a wider fallout beyond energy and food sectors.

S&P 500 index declined 5.16 to 1,994.96 and Nasdaq Composite Index decreased 11.67 or 0.3% to 4,557.95.

U.S. Gross Domestic Product, the broadest measure of goods and services generated in the economy, increased at a seasonally adjusted annual rate at 4.2%, the Commerce Department reported today.

The government agency had previously estimated growth of 4% based on preliminary international trade and inventories data.

Overall, GDP advanced 2.5% in the second quarter from a year ago, revised from the prior estimate of 2.4% annual growth rate and better than 1.9% annual rate in the first quarter.

After tax corporate profit after adjustments increased to annual rate of $1.84 trillion, up 6% from $1.735 trillion in first quarter.

The second quarter rebound averaged the economic growth rate of about 1.05% in the first half of the year. The economic recovery has been uneven and the latest quarterly revision at least for now assuaged worries of halting and choppy growth.

The latest quarterly revision was driven by an increase of non-residential fixed investment gain of 8.4% from the previous estimate of 5.5%.

International trade also offered smaller resistance to the growth and subtracted 0.43% compared to the previous estimate of 0.61%.

Change in private inventories supported the growth in the second quarter by 1.39 percentage points, less than the previous estimate of 1.66 percentage points.

U.S. Movers

Abercrombie & Fitch Co ((ANF)) dropped 4.8% to $41.88 after second quarter same-store sales declined more than expected.

Williams-Sonoma, Inc ((WSM)) plunged 11% to $66.82 after the retailer of home goods reported second-quarter results and offer a weak outlook.

European Markets

In London trading, FTSE 100 index fell 0.4% or 25.36 to 6,805.30 and in Frankfurt the DAX index declined 1.4% or 133.46 to 9,436.25.

In Paris, CAC 40 index dropped 0.6% or 27.84 to 4,367.42.

Bouygues SA slid 0.5% to €28.33 after the France-based communications, media and construction company reported sales in the first-half ending in June rose 0.6% to €15.2 million from €15.1 million a year ago period.

Net profit in the period surged 118% from a year ago to €410 million compared to €188 million and diluted earnings per share climbed to €1.26 from €0.59.

Asian Markets

Japanese stocks declined and extended weekly losses and the yen edged up for the second day in a row and Prime Minister of India is scheduled to lead a delegation of eighteen billionaires to visit the nation this weekend.

Narendra Modi is set to visit Japan and bolster economic ties and defense cooperation between Japan and India and balance ties with China as India seek to diversify power generation capability and seek investment in infrastructure projects.

The Nikkei 225 Stock Average slipped 74.96 or 0.5% to 15,459.86 and the broader Topix index fell 5.18 to 1,280.74.

The yen closed at 103.79 against one U.S. dollar.

Inflation and employment data are scheduled to be released tomorrow. Jobless rate is expected to be near 3.7% and consumer price index is expected to rise 3.3% in July.

In Mumbai trading, the Sensex Index gained 77.96 or 0.3% to close at 26,638.11 The CNX Nifty rose 18.30 to 7,954.35.