The Crimean referendum took place over the weekend, and 96.77% of the vote was in favor of joining Russia. Sanctions from the West will likely be announced soon. The Chinese renminbi fell 0.3% to an 11-month low, which is a big move for a currency; this comes after a string of bad economic data from China.
Over the weekend, there were predictions that the DJIA would open on Monday down 300-400 points and gold would open up $40-$50. It is still early in the pre-market at the time of this update, but it is worth noting that DJIA futures have been up over 90 points and gold has been down about $6.00. Of course there will be volatility in the near term as more news hit the wires.
With regard to a Western response, I still think that sanctions against Russia will prove toothless. And there is Putin discount already in the Russian market. Take a look at the chart comparing the U.S. market with the Russian market. For the time period shown, the Russian market has underperformed the U. S. market by 92.62%. Mean reversal is common in the markets.
With regard to China, the Chinese government is purposely bringing down its currency to make its exports more competitive. I think the market will take solace from this action. I also think that China may soon announce a mini stimulus to further calm the markets.
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