March 8, 2022
World stocks hit one-year lows on Tuesday with traders worried about the war in Eastern Europe, energy prices and inflation pressures
Most Asian markets tumbled on Tuesday and crude prices continued to surge as the United States mulls a ban on oil imports from Russia following its invasion of Ukraine.
Gold also climbed above the key $2,000 level, as the prospect of a Russia oil ban raised concerns of soaring inflation and slowing economic growth.
President Joe Biden’s administration is willing to move ahead with a US ban on Russian oil imports – even if European allies do not, US sources indicated, while Russia warned that prices could surge to $300 a barrel and it might close the main gas pipeline to Germany if the West halts oil flows.
International oil benchmark Brent crude, which briefly hit more than $139 a barrel in the previous session, was up about 2.6% at $126.42.
Still, with Europe rejecting plans to ban energy imports, there was some relief and European stocks picked up more than 1% in early trading, although some analysts said that may be a temporary reprieve.
Since mid-February, European banks have lost a quarter of their share value and an earnings hit looks inevitable.
The MSCI world equity index, which tracks shares in 50 countries, was down 0.2% and has lost 10% since early February. It was down as much as 0.5% in early Asian trading, hitting its lowest level since March 2021.
An Asian stock market gauge lost 1% in afternoon trade, tracking a bruising Wall Street session with Japan and Hong Kong leading losses.
The benchmark Nikkei 225 index dropped 1.71%, or 430.46 points, to 24,790.95, while the broader Topix index gave up 1.90%, or 34.17 points, to 1,759.86.
The Hang Seng Index sank 1.39%, or 291.76 points, to 20,765.87. The Shanghai Composite Index fell 2.35%, or 79.33 points, to 3,293.53, while the Shenzhen Composite Index on China’s second exchange shed 2.89%, or 63.75 points, to 2,139.67.
Yuan Seen As Safe Harbour
China’s yuan, however, touched a one-week high with investors eying Chinese assets as a potential safe harbour amid heightened market volatility over the Ukraine crisis.
South Korea’s won eased 0.8%, the steepest decliner among regional currencies, while benchmark stock indexes in the Philippines, Taiwan and China sank more than 2% each.
“Clearly oil is in the firing line now from both sides. And there’s a little bit of brinkmanship as to who can threaten whom when it comes to oil imports or exports,” Kyle Rodda, a market analyst at IG Australia, said.
UBS Global Wealth Management is recommending a neutral stance on equities and advising clients to hold commodities, energy stocks and the US dollar as portfolio hedges in the short term.
The yield on benchmark 10-year Treasury notes rose to 1.8369% compared with its US close of 1.749% on Monday. The two-year yield, which rises with traders’ expectations of higher Fed fund rates, touched 1.5947% compared with a US close of 1.548%.
The rally in oil and other commodities prices will only add to the global inflationary pulse with data this week expected to show the US Consumer Price Index climbed a stratospheric 7.9% on a year-on-year basis in February, up from 7.5% in January.
Key figures around 0820 GMT
Tokyo – Nikkei 225 > DOWN 1.7% at 25,790.95 (close)
Hong Kong – Hang Seng Index> DOWN 1.4% at 20,765.87 (close)
Shanghai – Composite> DOWN 2.4% at 3,293.53 (close)
London – FTSE 100> DOWN 0.5% at 6,926.76
Brent North Sea crude> UP 2.4% at $126.15 per barrel
West Texas Intermediate> UP 2.0% at $121.75 per barrel
New York – Dow> DOWN 2.4% at 32,817.38 (Monday close)
- Reuters with additional editing by Sean O’Meara