Is the Russia-Ukraine Scare Already Ending?

If the markets continue to interpret the lack of further actions as a true reversal, then the MICEX stock market in Russia may continue its recovery. That would take assets out of the safe havens, like bonds, the yen, gold and other go-to safety trades.

Russia’s MICEX was up about 5% on Tuesday, after having seen a double-digit drop on Monday when it appeared as though tensions were likely to escalate. The DAX in Germany was up 1.75% in Tuesday mid-day trading.

Gold had been riding high as international investors often flock to the shiny yellow metal in times of geopolitical uncertainty. The metal was down almost 1% at $1,338 per ounce.

The iShares MSCI Emerging Markets (NYSEMKT: EEM) fell almost 1.8% to $38.78 on Monday, and that drop may see about half of its losses from the prior $39.48 close made up on Tuesday morning.

We would also look for bond yields to rise off their levels of 2.60% on the 10-year Treasury and 3.55% on the 30-year Treasury. Still, weren’t long-term interest rates supposed to rise handily in 2014? That 10-year yield was just above 3% at the close of 2013.

It would seem unwise to believe that an end of military exercises is a formal end of the conflict. Crimea likely will remain a source of tension, which may not disappear in one day — nor just because markets have tried to normalize in a single trading session.