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Ukraine Destroys Russian Vehicle; Dow Witnesses Sell Off

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a - dow jones_0Just when the world thought that the crisis in Ukraine had de-escalated there were news out of Ukraine that it had destroyed a Russian armoured vehicle. The reaction of stocks around the world was that of panic and investors sold equities and safe haven investment demand picked up.

The US stocks had opened higher during the morning but just as news of the tensions hit the news wire, they reversed all their gains and are deep in the red. The 10 year Treasury Yields, considered a safe haven investment fell by close to 6 basis points to 2.3% while Gold which had witnessed a sell off earlier in the day trimmed most of their losses are still above the $1300 levels. The escalations of tensions overshadowed more signs that US economy remains to be in healthy shape and that companies are showing excellent gains in bottom lines. The Industrial Output report released by the Federal reserve showed excellent gains due to a sizeable jump in automobile output.

Also, the US producer prices inched up in July primarily driven by services such as transportation and warehousing. This gain in prices was for the second month in a row and makes many analysts believe that price growth isn’t out of control and would not force the Federal Reserve to raise interest rates and taking away any kind of deflationary risks from the economy.

Many analysts believe that the reason equities have done so well even in the face of geopolitical risks is because of the fact that the second quarter earnings for companies has been better than what the market as a whole had expected. The fact that the markets haven’t seen a huge pull back shows the confidence of investors on the health of the stock markets and that investors are using all the pull backs in the market as a buying opportunity.

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