MOSCOW, August 29 (RIA Novosti) – European and Ukrainian stocks took a hit following President Poroshenko's August 28 announcement that Russian armored troops had "entered" Ukraine.
"Geopolitical caution seeped into the markets after Ukraine President Petro Poroshenko's statement that Russia has invaded Ukraine. The event added to jitters about eurozone deflationary pressures after the single-currency bloc's largest economy posted disconcerting data amid a spate of low national inflation reports," The Street notes.
This "Russian invasion" news was immediately denounced by Russia as nonsense, but it prompted a dramatic drop in the stock prices of leading Ukrainian enterprises such as Zaporizhstal, one of the largest steel companies in Ukraine (-44.44 percent), Interpipe NTRP (-32.81 percent), and Azovstal Iron & Steel Works (-11.09 percent) according to RBC, a Russian business media source. Experts also pointed out a tremendous decline in the Ukrainian UX stock index, which has dropped by 8.43 percent.
European stocks have been hit as well, the Financial Times reports. "The Xetra DAX index in Frankfurt slid 1.1 percent and the FTSE MIB in Milan fell 2 percent, as the pan-European FTSE Eurofirst 300 index shed 0.6 percent," the media outlet notes.
"Contrary to signs recently that tensions in Ukraine were in the process of being lowered, the situation remains unpredictable and its potential for serious escalation is apparently significant," Miller Tabak’s chief economic strategist Anthony Kardakis said, as cited by the Financial Times.
According to RTTNews, the Eurozone economic confidence index has declined even more significantly than had been expected in August. It has slipped to its lowest level in eight months amid growing geopolitical tensions and pessimism regarding stagnating economic recovery in Europe. Even Germany, which many consider to be the Eurozone’s most robust economy, is facing serious economic challenges due to the ongoing conflict in Ukraine.
Meanwhile, it seems the American economy has escaped the effects of the Ukrainian crisis virtually unscathed.
"In spite of the latest bout of geopolitical angst, the S&P 500 equity index in New York slipped less than 0.2 percent from Wednesday's record [high]," the Financial Times reported on Thursday, August 28.
"The US stock market advanced to all-time highs while the Russia-Ukraine crisis rose toward a boil," CNBC's Kate Gibson writes, adding that tensions in Europe had not yet impacted the US economy and corporate profits.
"I would start to get worried when economic sanctions start to impact macro. There has been little impact on economic and earnings expectations. It becomes a worry when it starts to impact global earnings and macro. With particularly markets in Europe, you can start to see it, but will it spread to the United States and China," says Nick Raich, CEO at the Earnings Scout, as cited by CNBC.
Experts emphasize that the EU’s involvement in Ukraine's affairs have already begun undermining European economic stability. Furthermore, the European leaders are exceptionally skeptical about the prospects of incorporating Ukraine into the European Union. In June, 2014, French FM Laurent Fabius told France’s news channel I-Tele that the EU was not ready to join Ukraine as a member. Since the political and economic situation in Ukraine has worsened, its "European" prospects have become more and more bleak.
