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“There was hope that the tension would peak with Crimea rejoining Russia, but new epicenters of pro-Russian rhetoric are rising in the east, and the authorities in Kiev, it seems, will soon run out of patience and diplomatic means of settling the conflict,” a Capital Spreads trader told Reuters.
By early Monday afternoon, the German DAX had fallen by 0.89 per cent, the French CAC 40 by 0.91 per cent and London’s FTSE 100 by 0.70 per cent.
As investors weighed in on talk of further sanctions, whereby the opposing political sides could end up imposing tough measures that will inevitably harm all European economies.
Russian markets shed several percentage points to the move away from risky assets as well.
The ruble and Moscow’s main stock exchange dropped about 1 and 1.5 per cent, respectively, as the country’s cost of insurance against default hit a new high.
The pressure on the European exchanges sprung from tensions in eastern Ukraine. The situation escalated over the weekend after Kiev authorities announced a large-scale security operation involving the army to reclaim government buildings seized by pro-federalization protesters in several cities of Donetsk Region.
Traders warned that the action may signal the beginning of a more serious conflict, risking long-term geopolitical stability.
Beginning last month, protests have routinely rocked the eastern Ukrainian cities of Donetsk, Luhansk and Kharkiv, with citizens demanding referendums on their regions’ status within the country. The protests have spread to other towns in the Donetsk region, including Slaviansk, Mariupol, Yenakiyevo and Kramatorsk.
Last Monday, pro-federalization activists declared the formation of the independent People’s Republic of Kharkiv and Donetsk People’s Republic.