LONDON - Amid signs that Russia is back-pedaling in the Ukrainian crisis, the mood in financial markets improved Tuesday, prompting a large unwind of the sizable moves witnessed the previous day.
Stock markets in Europe, including in Moscow and Asia, have recouped a large chunk -- though not all -- of Monday's losses, while oil, gold, wheat and the Japanese yen have given back some of their gains.
The turnaround came after Russian President Vladimir Putin ordered tens of thousands of Russian troops participating in military exercises near Ukraine's eastern border to return to their bases. The mood was further bolstered when Putin said the situation in Ukrainian region of Crimea did not require military action. He said the recent military moves in Crimea that have effectively seen Russia take control of the peninsula were a humanitarian response, and that Russian military involvement would be a last resort.
"In response markets are making hay," said Kathleen Brooks, market analyst at Forex.com. "Stocks are rallying and clawing back yesterday's losses as the situation stabilizes, making it less likely that a conflict will arise in the near term, at least."
Following on from gains in Asia, European stocks traded sharply higher. The FTSE 100 index of leading British shares was up 1.5 percent at 6,812 while the CAC-40 in France rose 2.3 percent to 4,391. Germany's DAX, which underperformed the other two on Monday, was 2.1 percent higher at 9,559. Russia's RTS index, which slumped 12 percent on Monday amid fears that the crisis would escalate and prompt Western powers to impose sanctions on Moscow, rebounded too. It was trading 6.1 percent higher Tuesday.
Wall Street was likewise poised for a recovery, with Dow futures and the broader S&P 500 futures up 1.1 percent.
Elsewhere, many of the assets that were bid up Monday in the wake of a weekend of developments in Ukraine, were in retreat. The benchmark New York crude oil rate was down 1.5 percent at $103.37 a barrel, while an ounce of gold fell 0.9 percent to $1,336.
However, tensions remain, particularly in the Ukrainian region of Crimea, as Putin's order does not appear to have had any bearing on troops there.
"As such, markets will remain sensitive to Ukraine-related headlines and further bouts of risk aversion are likely," said Adam Cole, an analyst at RBC Capital Markets.
Developments in Ukraine have dominated the start of what is likely to be a busy week on the economic news front. As well as a raft of U.S. economic data that culminates with Friday's nonfarm payrolls figures for February, investors have the monthly policy meeting from the European Central Bank to monitor.
Earlier in Asia, Japan's Nikkei 225 added 0.5 percent to 14,721.48 and Hong Kong's Hang Seng rose 0.7 percent to 22,657.63. The Sensex in India gained 1.2 percent to 21,187.89 and Australia's S&P/ASX 200 rose by 0.3 percent to 5,400.20.