Morning Report Thursday 7 August 2014
Are Russia – Ukraine tensions creating a buying opportunity?
European stocks fell to their lowest levels in over 3 months as concern mounted about a build-up of over 20,000 Russian troops on the Eastern Ukraine border. Recent rhetoric from Vladimir Putin is concerning observers that Russia may invade the Ukraine for supposed humanitarian reasons. From an equity markets standout there is massive potential fallout for the already struggling Eurozone economies. Economic data last night from the regions powerhouse Germany showed some negative surprises:
German factory orders unexpectedly fell 3.2% compared to an anticipated +0.9%, the greatest fall since Sept 2011.
Australian shares have limited direct exposure to Europe, but investors have been increasing their appetite to overseas ETF’s (Exchange Traded Funds). A Bloomberg report yesterday showed US ETF’s had outflows of +$800m over the last 5 days, however compared to the $9.1bn of inflows in 2014. Many investors continue to believe that the region is about to recover like the US has since the GFC. Currently massive QE (Quantitative Easing) has not had the same impact as in the US but the stronger economies like Germany and the UK have certainly been improving. Unfortunately while the current crisis is a complicated issue the current escalation appears to be largely caused by one man’s ego. While I believe there will be more news from the region over coming weeks I believe this is helping provide a buying opportunity and is not a reason to run for the hills.
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