The Crisis In Ukraine Is Devastating It's Economy And Damaging E.U. And Russian Financial Markets

Reuters

Ugly Scenes In Eastern Ukraine Are Reflected In The Region’s Financial Markets -- Quartz

What the markets giveth, they also taketh away. A period of relative calm in Russian and Ukrainian markets ended abruptly today, amid a worrying escalation of tensions in eastern Ukraine. For investors, it never pays to be complacent, especially in this combustible corner of the world.

As the US, EU, and IMF rushed through aid packages, trade agreements, and other measures to support Ukraine’s teetering economy, its financial markets had began to show faint signs of life. But Moody’s cut the country’s credit rating deep into “junk” territory at the end of last week, citing fears of unpaid gas debts, political turmoil, and a host of other ills.

Bond investors spent the day dumping Ukrainian bonds, reversing some of the gains made in previous weeks. But yields (which move inversely to prices) aren’t yet signaling that the situation is as bad as it was in the run-up to the referendum on Crimea joining Russia. Still, the one-day spike today in Ukraine’s 10-year dollar bond was one of the largest since the conflict with Russia began.

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My Comment: While EU - Ukraine trade and investment is small .... Russian - EU trade and investment runs in the hundreds of billions of dollars. Russia is also Ukraine's primary trading partner ... so any interruption there will have a profound impact on Ukraine. My hope (since this crisis began) was that economic issues would bring all the parties together to resolve their differences, to do the necessary compromises, and to come to some form of reconciliation. Sighhh .... this has clearly not been the case. As a result .... and this is an easy prediction .... I expect hard times for most Ukrainians .... and in the worst case scenario .... a default that will essentially impoverish most Ukrainians for the next few generations. E.U. - Russian economic interests are also going to be hit .... to what degree is dependent on what additional sanctions will be employed .... but at this moment in time my expectation is that nothing will be done because everyone is genuinely afraid of that "worst case scenario" escalating to a level that will directly impact them.