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Analyst reaction after Russian forces invade Ukraine -Breaking

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© Reuters. Following the approval by Vladimir Putin of a military operation against eastern Ukraine in Kyiv on February 24, 2022, vehicles drive to the city’s entrance. REUTERS/Valentyn Ogirenko

(Reuters) – Russian forces launched missiles against Ukrainian cities, and landed troops along its coast on Thursday. Officials and media reported that this was after President Vladimir Putin authorized what he described as a “special military operation” in the east.

Below are the reactions of economists and analysts to events in Ukraine, and their consequences.

CRISTIAN MAGGIO – HEAD OF STRATEGY at TD SECURITIES LONDON

“The most volatile currencies, the Russian ruble and the Turkish lire, will outperform their peers the most.

“For the rouble – and not to mention the Ukrainian currency – the other risk is that liquidity simply drags out. Investors won’t want to participate at all.

Putin doesn’t know what will happen. As usual, Russian sources denied any intention to be militarily involved in Ukraine – and here we are, in the largest scale military operation in Europe since World War Two. From here, anything can happen.

“The safe haven bid is precisely what is happening.”

JUSTIN ONUEKWUSI, PORTFOLIO MANAGER AT LEGAL & GENERAL INVESTMENT MANAGEMENT, LONDON

This puts the central banks in an extremely difficult position. The Fed’s March hike is being priced out. Also, the Fed’s number of hikes in this year are being reduced because it feels wrong to take liquidity from markets at the wrong time.

While central banks will likely have to be able to see an inflation spike as a sign that rates could rise, it is possible for them not only to do so but also because the rate of interest increases could get much more extreme. Medium term inflation risk has increased significantly, according to me…

We viewed a 25-bps increase in U.S. interest rates in March, and we believe that the likelihood of this happening is significantly lower.”

FREDERIK DUCRZET, STRATEGIST AU PICTET

“(This) will cause the ECB to be more cautious, and might delay the decision about tapering bond sales.”

GULDEM ATAY, ANALYST WITH ISTANBUL ANATICS

“Turkey could be most affected by rising energy prices…Sanctions will not be announced at this time, but Turkey must abide by NATO’s steps.”

WU QIANG, POLITICAL ALYST INDEPENDENT, BEIJING

Russia pulled China in to this unfavorable situation.

It is possible for China to lose its relationship with Europe. This would be a loss of friendship. China and America could soon find themselves in a conflict due to a quasi-alliance. China has so far not demonstrated a willingness to stop war.

TAKAHIDE KIUCHI, EXECUTIVE ECONOMIST, NOMURA RESEARCH INSTITUTE, TOKYO

The sanctions would be very hard on Russia as well as the world economy. The sanctions could lead to high oil prices, plummeting stock markets, and rises in the price of safer assets, such as the Japanese yen. These would impede economic recovery from Japan’s COVID-19-induced slump. Russia having control over Ukraine would be a worrying precedent. It could send alarming signals to geopolitical flashpoints, such as Taiwanese and East China Seas.

GEORGE KANAAN, HEAD OF CASH EQUITIES, BARRENJOEY CAPITAL, SYDNEY

The market is looking for an excuse not to buy and they now have one. When there’s uncertainty, they flip the switch and strike.

That is why we see the market gap as it really is. “There is brinkmanship going on and you never know what it could lead to.”

CHRIS WESTON – HEAD of RESEARCH, PEPPERSTONE MELBOURNE

There are not buyers to take on risk and sellers are plentiful, which means that this market is being hit hard.

EXECUTIVE Director of INVESTMENT STATEGY, OCBC SINGAPORE VASU MENON

Historical evidence shows that such military actions and other geopolitical events are unlikely to have a major economic impact on global economies. Markets will recover after a sharp decline. People looking to purchase on dips need to take a long-term view and buy slowly.

YUAN YUWEI PARTNER, WATER WISEDOM ASSET MANAGEMENT HANGZHOU

It is simple to wager on an increase in inflation.

It means purchasing oil and agricultural products as well shorting U.S. consumer shares.

China will probably increase support for sectors such as agriculture and semiconductors, along with new energy.

KYLE RODDA MARKET ANALYST IG AUSTRALIA MELBOURNE

“This is very beneficial for gold, and very positive for other commodities overall, particularly oil. Stocks will fall because of the difficulty in pricing these outcomes.

HOWIE LEE, ECONOMIST OCBC, SINGAPORE

If Russia blocks international oil trade through sanctions, Asia will be a net-importer and feel the heat of higher energy import costs.

TSUYOSHI UENO SENIOR ECONOMIST, NLI RESEARCH INSTRITUTE, TOKYO

If the United States is willing to negotiate with Russia at high or top level, or Iran’s nuclear deal is quick agreed upon, then the international oil market will be in a flurry.

ROBERT RENNIE, HEAD OF FINANCIAL MARKET STRATEGY, WESTPAC, SYDNEY

Oil inventories have already fallen to an alarmingly low level, and Russia is a huge producer. Any sanctions that could threaten the supply of oil would prove disastrous. It’s a mystery, from an FX standpoint, why the euro doesn’t fall a bit more is not clear. This should be.

DAN WANG (CHIEF ECONOMIST), HANG SENG BANK CHINA, SHANGHAI

War will cause a food- and energy shortage. Turkey, Egypt, and Lebanon are all highly dependent upon wheat from Russia and Ukraine. This country is experiencing high inflation. The crisis will only get worse if there is a war. The most affected are those who live in poverty.

“But, the war’s impact on global commerce is limited because, aside from oil and russia, Russia does not have any supply chains that could impact the world. That’s different than China.”

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