The market’s Russia reaction is overdone, no joke


Ukraine Prime Minister Volodymyr Zelensky’s remark February 14 that Russia would attack his country on the 16th of February sent stock markets tumbling before a senior aide qualified the statement as a joke. Zelensky was a professional comedian before he became Ukraine’s leader.

The US stock market recouped some of its earlier losses, and the NASDAQ index closed unchanged.

A key political risk gauge, the cost of US-dollar-denominnated insurance against default on Russia’s sovereign bonds spiked to 2.75 percentage points above the interbank rate early February 14 before settling back to 2.5 percentage points. That’s close to the high point during the peak of the Covid-19 market panic in March 2020, with the difference that the credit default swap market reflected fear of sanctions against the Russian Federation rather than economic distress.