Sanctions imposed on Russian leaders by the United States and European nations weren’t enough to keep the global markets down over the weekend.
In the U.S., the Dow Jones industrial average suffered from poor performance last week falling 387 points, a drop caused in part by fears about potential violence in the Ukrainian region of Crimea. A referendum in Crimea had citizens casting their votes on whether or not to leave the Ukraine and become part of Russia, and so far, the votes have shown an overwhelming consensus toward joining up with Russia. This is exactly what economists were fearing toward the end of last week, as a shift in Ukrainian public opinion could easily turn to violence, leading to a plummeting market, USA Today reports.
However, despite the sanctions (which the U.S. and EU imposed on only a few Russian officials), the Crimean vote hasn’t yet led to any bloodshed — and that’s great news for investors with a stake in global economic performance. As of Monday morning, the Dow had risen 1.1% at 16,236 and the Standard and Poor’s 500 index was up 0.9% at 1,858. In Russia, the RTS index jumped up five points, though the market has seen better days. Still, these are better numbers than global investors had anticipated.
On the larger political spectrum, though, the Crimean vote isn’t necessarily a good thing. Western nations have called the vote illegal, saying Russian’s military actions in the Crimea region are in direct violation of Ukraine’s sovereignty. And those sanctions mentioned above? Right now, they’re mostly “toothless,” as Kathleen Brooks, research director at Forex.com, told ABC News. But that could all change this week if Western leaders decide to hit Russia (specifically Moscow) harder in order to prevent economic catastrophe.
It’s not just the markets that are at stake, either. As CNN points out, a Crimea-Russia union could revert Europe back to a Cold War-era power dilemma, destroying investment and trade opportunities in the process.
“Uncertainty in Russia, economic sanctions and a possible return to a ‘Cold War’ like posture will continue to add to market volatility for the foreseeable future,” says Sujoy Bhattacharya, Founder and CEO of Trade Greeks. “Smart money is playing it safe and conservative until tensions die down in the region.”
The U.S. Federal Reserve will hold a policy meeting this Wednesday, and the leading topic on the agenda looks to be the state of global markets. It’s unclear what President Obama and EU leaders will choose to do in Crimea or in Russia for that matter. Until the next big twist, investor around the world can enjoy the upswing — especially since there’s no guarantee it will be particularly lengthy.