Monaco is not usually a place for car bombs. That is the point of Monaco. But this morning, police are scouring the principality for the perpetrators of an explosive attack on a Ukrainian oligarch, whose name is being held back for operational reasons.
The victim is alive, but the message is clear: no sanctuary is safe. For investors, this is the kind of event that triggers a reassessment of risk premiums. If a wealthy Ukrainian can be targeted in the playground of the rich, what does that say about the security of capital?
Capital flight, already a theme from Eastern Europe, will now look for ever safer havens. Monaco's appeal as a tax-neutral bolt-hole may be dented. Expect a quiet hardening of insurance rates for high-net-worth individuals and increased scrutiny on the origins of wealth parked in the Riviera.
The immediate market reaction is muted: European indices are flat, but the euro is off a fraction. The real action will be in the spreads on Ukrainian sovereign debt, which are already distressed. This attack will not cause a rout, but it is another fraying thread in the fabric of global stability.
Central bankers will take note: when geopolitical risk becomes personal, it becomes a factor in consumer confidence. The Bank of England may yet cite this as another reason to hold rates higher for longer. For now, the manhunt continues.
The bottom line: in a world of capital mobility, security is the new liquidity. And liquidity, as we know, is the lifeblood of markets.
