Equity markets mixed, oil falls over Ukraine war
ONG KONG: Equity markets were mixed on Thursday as investors contemplated the impact of surging inflation and central bank plans to hike interest rates, while oil prices dipped but remained elevated on fears of more sanctions on Russia that could hit alre
HThe recent rally across equities over the past week appears to have run its course for now as investors nervously track developments in the Ukraine war, with efforts to reach a diplomatic solution crawling along.
All eyes this week are on North Atlantic Treaty Organization meetings, where United States President Joe Biden and other leaders are expected to discuss further punishing Moscow for the monthlong invasion, while the European Union is still debating a possible embargo on Russian oil.
A warning from Russia that repairs at a terminal near a Black Sea port may take up to two months, causing a drop in exports of about 1 million barrels a day, added to supply worries.
Both main contracts rallied by more than 5 percent on Wednesday — with Brent back above $120 — and they continued to advance in early Asian business before falling back in the afternoon.
There was a little support from speculation about progress in the Iran nuclear deal, which could
lead to the release of Tehran’s crude back onto world markets.
Will Sungchil Yun of VI Investment Corp. told Bloomberg News: “There are worries around both supply, as well as demand, which may keep prices rather volatile.
“But if fresh sanctions are slapped on Russia, we’re looking at another leg up,” he said.
The surge in oil markets has fanned already sky-high inflation — it is at a 40-year high in the United States and a 30-year high in the United Kingdom — putting pressure on central banks to tighten monetary policy before prices run out of control.
More hawkish
In light of that, the Federal Reserve (Fed) has turned increasingly
hawkish.
After announcing a quarterpoint lift last week, Fed Chairman Jerome Powell suggested on Monday that officials could raise interest rates as much as half a point on more than one occasion if price gains did not slow, even at the expense of the economic recovery.
The prospect of tighter financial constraints down the line is weighing on stocks.
“As traders digest higher [Treasury] yields and higher inflation signals via the oil price channel, stocks are lower,” SPI Asset Management’s Stephen Innes said.
“We may see volatility increase further regarding multiple 50-basis-point hikes and even emergency rate hikes in the near term. Pressure points are building again with oil back on the boil, resulting in stagflation weighing on sentiment again,” he added.
After a negative lead from Wall Street, Asia fluctuated.
Tokyo, Sydney, Singapore, Manila, Bangkok and Jakarta edged up, but Hong Kong, Shanghai, Seoul, Wellington, Taipei and Mumbai were all down. London, Paris and Frankfurt rose at the open.
And the Moscow stock exchange resumed trading of some shares as it continued reopening after a month-long suspension over the invasion.
Trading resumed for only about 30 of the largest companies that make up the ruble-denominated MOEX Russia Index, which saw early gains of more than 10 percent.