LONDON (Alliance News) - Major European stocks indices, including the FTSE 100 have recorded solid gains Tuesday, while precious metal prices have fallen further from recent highs, as investors react positively to Vladimir Putin's comments that Russia does not want to extend its reach further into Ukraine than Crimea.
In an hour-long speech, delivered by the Russian President to his parliament before signing in the accession of Crimea and its biggest city Sevastopol as the 84th and 85th members of the Russian Federation, Putin said "don't believe those who say that Russia will take other regions following Crimea."
Despite the Crimean referendum being widely decreed as illegal by western governments, the impending threat of further sanctions from the UK, Europe, and the US if there is not a de-escalation, and the fact that there are still thousands of Russian troops on the eastern Ukrainian boarder, equity markets appear to have been broadly encouraged by Putin's comments.
After having spent most of the morning in the red, the FTSE 100 began rallying on the Russian leader's comments and has closed up 0.6% at 6,605.28, with the FTSE 250 closing up 0.4% at 16,354.20.
Major European markets have also closed firmly higher, with the CAC 40 up 1.0%, and the DAX 30 up 0.7%.
US markets are also continuing higher, with the DJIA and the S&P 500 both up about 0.5% and the Nasdaq Composite up almost 1.0%.
The situation in Ukraine continues to be fast moving, with reports around the time of the European equity market close that a Ukrainian serviceman has been killed during an attack on a Ukrainian base in the Crimean capital. The Ukrainian Prime Minister has reportedly called the attack a "war crime," saying that the conflict has moved from a political to a Military stage.
UK Prime Minister David Cameron has issued a statement saying that the attempt to annex Crimea to Russia is a "flagrant breach of international law sending a chilling message across the continent of Europe." The PM says that further EU measures will be discussed on Thursday when European leaders are due to meet. "The choice remains for President Putin: take the path of de-escalation or face increasing isolation and tighter sanctions," the statement says.
Gold slipped further from its high, made on Sunday around the time of the referendum, recording a low on Tuesday of USD1,350.40 per ounce.
"This morning?s remarks by Russian President Vladimir Putin further soothed investor concerns, causing equities to rise and safe haven gold to extend its losses," said Forex.com analyst Fawad Razaqzada.
Equity investors appeared to ignore the effect the conflict has had on European businesses after both the German and eurozone ZEW surveys recorded a bigger drop in economic sentiment than expected this month. The eurozone sentiment index fell to 61.5 in March from 68.5 in February, missing economist expectations of 67.3. the German survey dropped to 46.6 in March, from 55.7 previously, missing expectations of 53.0.
"The typically cautious and well-informed German business community were obviously not well-amused by events in Ukraine," said CMC Markets analyst Jasper Lawler.
The readings knocked the euro, which recorded a session low of USD1.3878. However the single currency has recovered throughout the day to and is now close to flat against the dollar Tuesday at USD1.3915.
The euro may have found some extra support through the day from the morning news that a German court confirmed the legality of the European Central Bank's European Stability Mechanism. The ECB's EUR700 billion bond-buying programme was widely credited with saving the euro at the peak of the financial crisis, and the lodging of the court complaint last month led to a sharp drop in the euro at the time.
Although there were no UK data releases Tuesday, the Bank of England announced its two new deputy governors. Ben Broadbent will succeed Charlie Bean as deputy governor responsible for monetary policy on 1 July, and International Monetary Fund official Nemat Shafik will take the newly created role of deputy governor for markets and banking from August 1.
BoE governor Mark Carney is due to speak shortly at City University, where he is expected to address the shake up of his monetary policy committee.
Amid the dearth of UK data, the pound has slipped slightly lower against the dollar. After the equity market close the pound trades at USD1.6565.
Meanwhile, the London AIM index underperformed its main market peers Tuesday, closing down 0.3% as the indices biggest company by far, ASOS, had an atrocious day.
ASOS shares closed down almost 18% after the online retailer announced an increase in capital expenditure for the year. The investment is focused on the company's Chinese operations and is expected to lead to a squeeze on margins over 2014, in what Jefferies analyst David Reynolds says is "clearly a year for investment." The company still reported 26% revenue growth over the first two months of the year, but that lags previous full-year consensus expectations of 32% growth.
There appeared to be a read across to the general retailers in the main market as the FTSE 350 sector was amongst the worst performing Tuesday, with Next closing down 2.2% and Sports Direct losing 1.1%.
The industrial metals sector posted the best gains of the day, with Russia and Ukraine-focused steel maker Evraz leading the FTSE 250 higher to close up almost 10%.
BAE Systems was the best single performing blue chip stock Tuesday, closing up 2.9% after receiving an upgrade to Outperform from Sectorperform by RBC Capital Markets.
In the UK corporate calendar for Wednesday, Smiths Group announces half-year figures, with full-year numbers due from Cape, Charles Taylor, and Partnership Assurance.
It's a big day for UK economic news ahead, with the latest unemployment numbers out at 0930 GMT, along with the minutes from the last MPC meeting. Then at 1230 GMT, George Osborne will deliver the budget for 2014.
From the eurozone, construction output data is due at 1000 GMT, while in the US, the Federal Reserve continues its two-day policy meeting, with an announcement due after the European equity market close Thursday - economists broadly expect a further USD10 billion cut to the central banks monthly asset purchases.
By Jon Darby; jondarby@alliancenews.com; @jondarby100
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