Breakout

As new sanctions hit Russia, here’s the real thing that has Wall Street worried

Breakout

A failed follow-through on a peace accord. An anti-government militia parading captive European observers through the streets. A television station seized by protesters, threatening to air pro-Russian newscasts. These just a few of the flare-ups occurring in Ukraine over the past few days, and uncertainty from it spilled over into Asian markets last night.

As the U.S. hands down new sanctions on Russia while Ukraine descends into a chaotic power struggle, markets here and in Europe have been mostly able to shrug off the instability. But will it last?

Brad McMillan from Commonwealth Financial believes the situation is different now. “Things have changed,” he says in the attached video. “What we’re entering in now is a more sustained period of uncertainty, and i wouldn’t be surprised to see the markets take it more seriously, especially with the implications for Europe.”

Besides the fact that Russia supplies much of the natural gas to European countries, disruptions in energy delivery would likely pale in comparison to the possibility of a military strike. “You have the potential for a military invasion of Ukraine, I wouldn’t take that out. War is always bad for the markets in the short term, and that’s something we haven’t seen recently.”

But as we focus back on U.S. markets (^GSPC), it’s not Russia that worries McMillan most. It’s our domestic economy and whether a recovery can be sustained. “Employment is going to be the big one for me,” he says. “This quarter is really going to tell us whether the employment growth is going to allow the economy’s [recovery] to be sustained, or whether in fact this is another head-fake.”

And to that end, Friday’s non-farm payrolls report will be the most important figure to look at this week. Economists expect Non-Farm Payrolls for April to come in at 210,000, compared to 192,000 last month.

Also related to the jobs report data, McMillan notes wage-growth needs to pick up beyond 2% if the U.S. recovery is going to be for real.

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