HONG KONG (AFP) – Asian equities were mixed yesterday as three days of painful losses gave way to a semblance of stability, though oil prices extended gains after the United States (US) and Britain moved to ban imports of Russian crude.
But while the panic selling that characterised markets for two weeks eased, analysts warned of further volatility as Russia showed no sign of letting up on its invasion of Ukraine.
The crisis has fuelled fears that the fragile global recovery from Covid-19 will be replaced by a period of stagflation, in which inflation surges and economies flatline or contract.
A crucial driver of equity selling has been rocketing commodities prices.
Crude is the main worry as the removal of Russia’s output will compound an already tight market. Russia is the world’s third-biggest oil producer.
Wheat and metals including nickel have already hit record highs.
Warnings that US President Joe Biden would put an embargo on imports from Russia sent Brent prices soaring to as high as USD139 on Monday – about USD8 short of a 2008 record – before they retreated.
However, confirmation of the ban on Tuesday, and news that Britain would join by the end of the year, sent the black gold roaring up again.
EU nations, which receive roughly 40 per cent of their gas imports and one quarter of their oil from Russia, instead opted to set a goal of cutting their Russian gas imports by two-thirds.
In Wednesday trade Brent was sitting at around USD130, while WTI was hovering around USD125.
Biden’s announcement on oil also shot a hole in a rally on Wall Street, with all three main indexes ending in the red.
Asia squeezed out some gains in the morning but traders struggled to maintain momentum.
Sydney, Mumbai, Singapore, Taipei, Manila, Jakarta, Bangkok and Wellington rose but Tokyo, Hong Kong and Shanghai fell.
The oil ban is the latest volley at Russia, which has been hit with a series of wide-ranging and strict sanctions that have crippled the economy, and led numerous firms to exit with giants McDonald’s, Coca-Cola and Starbucks the latest.
Fitch has warn Moscow is on the verge of its first sovereign debt default since 1998.
There was a little support from comments by Ukraine President Volodymyr Zelenskyy, who in an apparent nod to Moscow said he was no longer pressing for NATO membership.
He also said he was open to “compromise” on the status of two breakaway pro-Russian territories that Russian President Vladimir Putin recognised as independent just before unleashing the invasion.