Asian markets fall and oil extends recovery as war in Ukraine rages

Asian markets fell further on Tuesday, oil prices rebounded again and nickel jumped above $100,000 as investors try to assess the impact of the war in Ukraine on the global economy.

As Russia’s invasion of its neighbor continues, commodity prices have hit record or multi-year highs, forcing observers to reassess their prospects for a global recovery, with some now warning of a period of runaway inflation and slow growth or recession.

Monday’s session saw a sea of ​​red on trading floors after the United States announced it was considering a ban on crude imports from Russia, the world’s third-largest producer, pushing up the price of crude. Brent close to $140 for the first time since 2008.

While black gold has retreated slightly from that high, it remains high and continued to rise again on Tuesday.

Europe was not so keen on the idea of ​​the United States, with German Chancellor Olaf Scholz saying Russian oil and gas are of “essential importance” for the continent’s economy. Around 40% of the EU’s gas imports and a quarter of its oil come from Russia.

Meanwhile, Moscow has warned that in retaliation for tough sanctions imposed on it for the invasion, it could cut off natural gas supplies to Europe via the Nord Stream 1 pipeline, adding upward pressure extra on crude as investors bet on finding other energy sources. .

European gas prices hit record highs on Monday, while other commodities from Ukraine and Russia also rallied, with wheat at a record high and nickel topping $100,000 a tonne for the first time before to come back down.

The crisis comes just as uncertainty was growing due to soaring prices caused by surging oil demand, tight supplies and pandemic-induced supply chain grunts, among others.

Meanwhile, central banks are beginning to roll back the ultra-loose monetary policies put in place at the start of the pandemic as they try to rein in runaway prices.

And although analysts have scaled back their expectations for how much and how quickly officials will tighten in light of the war, they still see a tougher investment environment ahead.

“It’s about slowing growth and increasing inflation,” Alifia Doriwala of Rock Creek told Bloomberg Television. “With the escalating sanctions on Russia, it hits all sectors. Then you’re going to have central bank action in the midst of very uncertain economic growth.”

After a rout in the US markets, Asia is again well into negative territory.

Tokyo, Hong Kong, Singapore, Seoul and Wellington lost more than one percent, while Shanghai, Bangkok and Taipei lost more than two percent. Manila sank more than 4%, while Sydney, Jakarta and Mumbai were also in the red.

London, Paris and Frankfurt extended Monday’s big losses at the open.

“Disruptions in energy markets and the possibility of a geopolitical paradigm shift create a highly unpredictable environment.” said Stephen Innes of SPI Asset Management.

“Given how long this has been going on with all parties potentially entrenching themselves further in their positions, the geopolitical situation looks likely to get worse before it gets better, although we should reach a point at which actions will begin. to stare into a light at the end of the tunnel before it becomes obvious.”

And Matt Simpson of StoneX Financial added: “It was the sharp rise in oil that sparked the selloff in stocks as traders once again priced in stagflation concerns.

“If oil prices stabilize, that should remove some selling pressure from equity markets.”

– Key figures around 08:20 GMT –

Tokyo – Nikkei 225: 1.7% drop to 25,790.95 (close)

Hong Kong – Hang Seng Index: DOWN 1.4% to 20,765.87 (close)

Shanghai – Composite: DOWN 2.4% to 3,293.53 (closing)

London – FTSE 100: 0.5% drop to 6,926.76

Brent from the North Sea: +2.4% to 126.15 dollars a barrel

West Texas Intermediate: UP 2.0% to $121.75 a barrel

Dollar/yen: UP to 115.41 yen against 115.27 yen on Monday evening

Euro/dollar: UP at $1.0892 against $1.0858

Pound/dollar: UP to $1.3114 from $1.3109

Euro/pound: UP to 83.07 pence against 82.79 pence

New York – Dow: DOWN 2.4% to 32,817.38 (closing)