LONDON: Global stocks broke a four-day slide and demand for safe-haven assets waned on Wednesday, with investors waiting to see what Russian President Vladimir Putin does next after sending troops into separatist regions of Ukraine.
The initial push to send soldiers to Donetsk and Luhansk this week triggered coordinated, yet modest sanctions from Western nations, albeit with the prospect of more to come if Moscow seeks to push further into the country.
After chalking up a 3.6% fall since last Friday, the MSCI World Index, a leading gauge of equity markets globally, was up 0.2% in early European trade, helped by broad gains across regional bourses.
The FTSE 100 was up 0.5% and the STOXX Europe 600 up 0.7%, tracking overnight gains in Asia where MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.5%.
S&P 500 stock futures pointed to a 0.8% higher open, rebounding after officially entering correction territory in the prior session.
"In the end what investors want to know is: does this impact earnings or not? If not, the temptation to buy the dip is high," said Dirk Willer, global head of macro and asset allocation at Citi.
"Markets tend to see geopolitical events as opportunities," he said, adding past years had shown this was the correct policy to adopt."
Despite the bounce, commodity prices continue to remain elevated, with traders nervous that supplies could be curtailed if the situation on Europe's eastern edge escalates.
Brent crude was last up 0.4% at $97.21 a barrel, while West Texas Intermediate was up 0.3%.
Europe's benchmark gas price was up 4.4%, however, adding to a hefty gain a day earlier after Germany halted Russia's Nord Stream 2 gas pipeline.
After posting the sharpest leap in three-and-a-half years on Tuesday, wheat futures were down 0.7%.
Corn futures also pulled back from an eight-month high, down 0.4%.
Gold edged lower, down 0.1% at $1,896 an ounce.
Central banks too
The crisis in Ukraine and the potential for surging energy prices come on top of nerves about whether the global economy can handle rising interest rates.
Aidan Yao, senior emerging Asia economist at AXA Investment Managers, told the Reuters Global Markets Forum that the Fed and other central banks would now need to contend with both market sentiment and rising energy prices.
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"So it's a rock and a hard place - the onus will be on the Fed to make sure spikes in commodity prices don't morph further into inflation expectations and wage/pricing behaviours," he said.
However, Citi's Willer said he did not expect events in Ukraine to deter central banks from tightening policy, with the investment bank sticking to a forecast for a 50 basis point hike from the US Federal Reserve in March.
"I doubt the geopolitics will mean any major change as the Fed are seen by many as so far behind the curve," Willer said.
"Usually the mantra is that high oil prices are a tax but that's gone out of the window as inflation pressures have been so strong and so underestimated by central banks."
The Reserve Bank of New Zealand announced its third consecutive rate hike on Wednesday, lifting its benchmark cash rate by 25 basis points to 1%, as expected, but surprising investors with a hawkish tone. The New Zealand dollar rose 0.6% on the news and is on its longest streak of daily gains in almost two years.
Elsewhere in currency markets, moves were fairly muted, though hopes that war in Ukraine can be avoided took some of the bid from safe havens.
The euro was up 0.1%, with sterling 0.2% higher. The dollar was down 0.1% against a basket of currencies.
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