Outside a Moscow stadium one night in 2006, deputy central bank chief Andrei Kozlov was walking to his car after playing soccer when two men opened fire, pumping bullets into his head and neck and killing his driver.

Days before the murders, the man leading Russia’s fight against money laundering had shut down a scheme used to funnel $1.6 billion of dirty funds abroad, including at least $112 million via Vienna-based Raiffeisen Zentralbank Oesterreich AG, according to Russian and Austrian investigators.

It was a trickle in a flood of illegal outflows that would reach $52 billion in 2012 alone, according to former central bank Chairman Sergey Ignatiev. Such flows are now in the cross hairs of President Barack Obama’s efforts to penalize Vladimir Putin for annexing Crimea and to halt his incursions into Ukraine. Obama signed a law on aid to Ukraine this month that includes a clause that allows the U.S. to go after assets of Russian officials and their allies who are deemed complicit in “significant corruption.”

“This is a declaration of war by the Obama administration on the current governing Russian elite,” Ariel Cohen, senior fellow at the Heritage Foundation, a Washington-based research group, said by phone from New York. “There will be a lot of people potentially targeted.”

David Fuller's view

The US is mostly using 21^st century surveillance and financial ‘warfare’ to make Putin’s late-19^th / early-20^th century tactics in Ukraine potentially costly.  This is certainly far less dangerous than a military clash between NATO and Russia but it will clearly have to be ratcheted up, to influence Putin, or more likely his colleagues.  Russia has some of the IT skills to respond in kind.

Meanwhile, there were only ugly skirmishes along the Russia-Ukraine border over the weekend, so traders in Europe (SX5E) and the USA (SPX) were mildly relieved and pushed their stock markets a little higher today on gradually improving GDP growth and the low interest rate environment.  In markets, an external crisis has to be seen to be worsening for it to affect short-term sentiment.  If it is not worsening traders and investors reduce hedges, as you can see with Brent Crude today (daily & weekly) and focus on domestic market conditions.  

However, we continue to see warning signs on Wall Street where the leading indices look tired.  This is particularly true of the Nasdaq Composite Index (daily & weekly), despite Apple’s strong performance (daily  weekly) last Friday and again late today.  This tech-heavy Index led on the way up and is leading in the loss of its form.  A close above 4200 is required to remove current pressure on lows just beneath the psychological 4000 level.

Additionally, the Russell 2000 Index (daily & weekly) which is comprised of the smallest 2000 companies in the Russell 3000 Index, shows a similar loss of form.  It needs to close above 1165 to remove pressure at least temporarily from prior lows near 1100.  This loss of form by previously leading smaller cap shares suggests that market breadth is deteriorating. 

I would remain cautious of previously fashionable high valuation shares which have been momentum plays.  In today’s environment, with investors around the globe continuing to become somewhat more cautious, I would prefer big companies with PERs lower than their broad indices, plus attractive yields to compensate for a somewhat riskier environment.