Renewed escalation in Ukraine hits region’s financial markets

Claims by Ukraine’s government that Russia has deployed troops in the east of the country have led to sharp falls in financial markets across Emerging Europe today. Some of the sharpest falls have, understandably, been in Russia itself, where hopes that a diplomatic solution to the crisis might be found had triggered a rally in the stock market in the early part of this month. This always seemed somewhat optimistic to us and, while the latest spat could yet blow over as both sides pull back from the brink, we expect both Russian stocks and the ruble to remain under pressure over the coming months.