Ukraine Plane Crash: What Happens Next

The tragedy of Malaysian Airlines MH17 will have wide-ranging and potentially long-lasting effects on markets. The initial reaction was a rush to safety and that mean JPY buying while the skid in NZD continued. Data on Japanese departments store sales are due later but the focus will remain on Ukraine and Israel.

Markets have drawn the conclusion that Ukrainian rebels were responsible for mistakenly shooting down the civilian aircraft.

The move will surely turn the public against the separatists and put pressure on Russia to halt support. The key question right now is how Russia will respond but Putin's initial comments blame Kiev and that will do nothing to end the conflict.

If Russian continues to dig in its heels and support the rebels it will be swiftly isolated and the chance of escalating sanctions is significant.

An even greater risk is if Russian direct involvement is proven. The Ukraine has released intercepted audio tapes that purport to show assistance from Russian military officials.

The yen is at risk of breaking out on this story and the Israeli ground assault in Gaza. Markets generally tend to overreact to geopolitical news but this could be an exception, at least for a few more days.

In any case, the story will be the major focus of markets Friday and into next week. What will be overlooked is a fantastic report; the Philly Fed rose to 23.9 from 16.0 expected and new orders rose to the highest since 2004.

The lone slice of economic data in Asia-Pacific trading is Japanese June dept store sales at 0430 GMT. Another event that could get attention is the BOJ minutes at 2350 GMT. Neither is likely to move markets.