Yesterday’s events in eastern Ukraine and the Gaza strip are weighing on European indices this morning, as investors price in the additional geopolitical risk that comes with both events. US futures are not experiencing the same declines and are actually pointing to a slightly positive open, which just goes to show how short term these shocks to the market are at the moment. There’s always investors out there looking to buy the dips.

You could say that both events were fully priced into US indices on Thursday, given that the markets closed after the Israeli ground offensive was announced.

However, the Dow didn’t even shed 1% following both events, which begs the question, how much additional geopolitical risk has actually been factored in? Are investors being too complacent when it comes to these events?

This is difficult to determine and the potential complacency of investors has been raised on a number of occasions this year. What I think is preventing any significant sell-off is the uncertainty around what comes next. It is unlikely that nothing will be done in response to the passenger plane being shot down by, what appears to be, the pro-Russian rebels occupying areas of eastern Ukraine.

One outcome could be an escalation of the crisis, which is not desirable for investors and could result in a greater sell-off. Another outcome could be that something positive comes from this tragedy in that it acts as a wakeup call to all involved and encourages them to come up with a diplomatic solution to the crisis.

This would be positive for all involved and for the markets. While this would be the ideal outcome, the fact that we’re hearing all sides blaming each other this morning suggests it’s the least likely of the two outcomes.

In terms of what this means for the markets today, based on what we’ve seen so far, it would appear that all of the uncertainty isn’t weighing too heavily but it is impacting the volatility. This isn’t unusual in times of uncertainty as traders find it much more difficult to predict market direction.

Given that it’s the end of the week, I expect this to continue for the rest of the day, unless of course, we see further escalation of either event.

The scarcity of economic data won’t help this, although there are two significant economic releases from the US later, the preliminary UoM consumer sentiment and CB leading indicator readings.

We may see some volatility in the markets following these releases, but to an extent, they are likely to be overshadowed by the events in the Ukraine and the Gaza strip.

Ahead of the opening bell, the S&P 500 is expected to open 2 points higher, the Dow 30 18 points higher and the Nasdaq 100 8 points higher.