Markets around the world are coughing up gains on fears of how Russia might respond to the latest round of Western sanctions, and on nasty data out of Europe.
The Wall Street Journal’s Patrick O’Connor reports that Russia may be considering restricting parts of its airspace to Western airlines, which could significantly drive up the cost of flying. O’Connor cites a Russian newspaper report, while Moscow has so far denied that that is an option.
But that they will respond is not in doubt. “The government of Russia has already proposed a series of retaliatory measures against the so-called sanctions of certain countries,” Russian President Vladimir Putin said recently according to O’Connor. “I think that in current conditions, with the goal of protecting the interests of domestic producers, we could certainly think about that,” he added.
Russia has also now amassed 20,000 troops on the Ukrainian border after declaring the eastern part of that country to be on the verge of a “humanitarian disaster.”
Meanwhile, the Italian economy fell into recession after posting two straight quarters of negative GDP. “Italy only briefing emerged from deep two-year recession in the last quarter of 2013,” reports the
FT’s Rachel Sanderson. “The figures show Italy’s GDP in the second quarter at its lowest level since 2000, according to the national statistics office report from news agency Ansa.” U.K. industrial production also came in well under expectations, at 0.3% versus 0.6% forecasted by analysts.
As a result, markets are tanking around the world. Japan’s Nikkei fell 1.1%, and Hong Kong’s Hang Seng closed down 0.3%. In Europe, Britain’s FTSE was off 1.1%, while Germany’s DAX was down 1.3%. U.S. futures were off 0.3%.
The German two-year note was trading at zero as investors fled to safe assets. The last time that happened was during the Eurocrisis of 2011-12. The 10-year note also fell to record lows.
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