When markets opened later on Sunday, some investors were keeping an eye out for any fallout from a failed mutiny that occurred in Russia on Saturday. They anticipated a shift towards safe haven assets like U.S. government bonds and the dollar.

After taking the city of Rostov, heavily armed Russian mercenaries under the command of Yevgeny Prigozhin, a longtime supporter of President Vladimir Putin and the creator of the Wagner army, pushed most of the way to Moscow before stopping, defusing a significant conflict. According to a Reuters witness, they started to leave the military headquarters in Rostov that they had taken control of on Saturday night.

Since Russia’s invasion of Ukraine in February 2022, which created disruptions in markets and through global finance as banks and investors scrambled to unwind, financial markets have frequently been tumultuous.

Following the events of Saturday, several investors claimed they were concentrating on the possible effects on safe-haven assets like U.S. Treasuries and on commodities prices, given that Russia is a significant energy provider.

“It certainly remains to be seen what happens in the next day or two, but if there remains uncertainty about leadership in Russia, investors may flock to safe havens,” said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities in New York.

Despite the de-escalation, according to Goldberg, “investors may remain nervous about subsequent instability, and could remain cautious.”

The incident garnered attention on a global scale and reawakened a long-standing worry in Washington about what might happen to Russia’s nuclear arsenal in the case of internal unrest.

“Markets typically do not respond well to events that are unfolding and are uncertain,” particularly relating to Putin and Russia, said Quincy Krosby, chief global strategist at LPL Financial.

“If the uncertainty escalates, you’re going to see Treasuries get a bid, gold will get a bid and the Japanese yen tends to gain in situations like this,” Krosby said, mentioning typical safe-haven assets that investors buy when risks rise.

While the de-escalation meant that markets might not currently react much, Alastair Winter, Global Investment Strategist at Argyll Europe noted that “Putin has clearly been weakened and there will be more developments.”

The U.S. dollar, in his opinion, is gaining “some support as the market returns to speculating over rate hikes and cuts and recession in different economies.”

Recently, stocks have been trending primarily upward, which some have suggested may make them more susceptible to a selloff. The S&P 500 is up 13% year to date, but it has slowed down recently as interest rates have come into focus. Jerome Powell, the head of the Federal Reserve, hinted to future interest rate increases during testimony last week.

Some observed little activity as the situation appeared to have been resolved. According to Rich Steinberg, head of market strategy at the Colony Group in Boca Raton, Florida, “markets will kind of treat this as another geopolitical risk” and “some frayed nerves were calmed in the short run” by the de-escalation.

(Adapted from Reruters.com)

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