Russian stocks rose to their highest level in three months after an announcement by Ukrainian President, Petro Poroshenko, that he had entered into a “ceasefire process” with Russian President, Vladimir Putin.
The main Micex index jumped an impressive 3.5%, while Russian gas giant Gazprom saw its highest leap since June in rising by 3.3%. The Russian rouble also saw a surge of 1.6% against the dollar to 36.86roubles.
These gains were made despite Russia claiming that the country was not party to the conflict although the Kremlin did later concede that steps towards peace had been made.
This is good news for the Russian economy as it hopes to regain some stability after the Rouble already falling 11% this year against the US dollar and hit its lowest rate since it was restructured in 1998.
Analysts welcomed the news of this rise in currency with James Butterfill, a global equity strategist at Coutts bank, saying: “It doesn’t mean that Ukraine crisis is over, but it is a step in the right direction,”
“It reduces some uncertainty and suggests that investors will have one less tail risk to deal with.”
Despite uncertainty within the region the Russian economy is still growing at a rate of 0.8% in the second quarter of 2014 after growing at a rate of 0.9% between January and March.
This growth is sorely needed within the country as economic sanctions from both the United States and the European Union become increasingly stricter because of the conflict although this move may encourage them to ease off as neither are particularly keen to cut off trade with Russia as it is likely to damage them economically. However, US Treasury Secretary, Jacob Lew, has said: “It is essential that Russia work with Ukraine and other international partners to find a lasting settlement to the conflict. If Russia does so, these new sanctions could be suspended”.
The brave investor may consider Ukraine as an option. Despite its political turmoil in recent years, its break from Russia has seen it firmly align itself with the EU and as such it has received tremendous backing and could receive further financial boosts from its European partners and Western parts of the country remain relatively stable.
Russia itself has flourished from the downfall of communism as it is now a major player on the global energy scene with massive oil and gas reserves as well as the heavy machinery industries associated with it and other sectors taking off like technology and defence. Its location at the crossroads of Europe have seen it make the most of its geographical location with major trade deals with the EU and China coming into place in recent months as well as warming relations with America over the past twenty years seeing more trade between these once sworn enemies.
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