Joe McDonald
BEIJING (AP) – Global stock markets slid yesterday and oil prices surged more than USD7 per barrel as Russian forces stepped up attacks on Ukrainian cities.
Frankfurt, Shanghai, Tokyo and Paris declined as President Vladimir Putin’s invasion fed fears of global economic turmoil. London opened higher.
The war is adding to worries about global economic growth as the Federal Reserve and other central banks gear up to fight surging inflation by raising interest rates.
“The conspiracy of geopolitical uncertainty and stagflation-type impulses is a brutal shock,” Tan Boon Heng of Mizuho Bank said in a report.
Investors were waiting for more clues about possible rate hikes when Fed Chair Jerome Powell spoke yesterday before Congress.
In early trading, the DAX in Frankfurt fell 1.4 per cent to 13,715.13 and the CAC 40 in Paris sank 1.2 per cent to 6,322.17. The FTSE 100 in London gained 0.2 per cent to 7,346.15.
Russia’s central bank said stock trading on the Moscow exchange remained closed yesterday for a third day, though trading of currencies and precious metals would resume for the first time this week.
The value of Russia’s ruble fell further to less than 0.9 United States (US) cents despite its central bank’s decision on Monday to raise interest rates to defend the currency.
On Wall Street, the future for the benchmark S&P 500 index was up less than 0.1 per cent. That for the Dow Jones Industrial Average was up 0.2 per cent.
Oil prices rose despite an agreement by the US and other major governments in the International Energy Agency to release 60 million barrels from strategic reserves to stabilise supply.
Benchmark US crude jumped another USD7.94 to USD111.35 per barrel in electronic trading on the New York Mercantile Exchange. It rose USD7.69 on Tuesday to USD103.41.
Brent crude, the international price standard, gained USD7.84 to USD112.87 per barrel in London. It soared USD7 the previous session to USD104.97.
“Markets dismissed the notion that 60 million barrels of strategic reserves released will be consequential to the risks of Russian supply jeopardised,” said Tan of Mizuho. “Russia pumps more than that in just six days.”
Late Tuesday, President Joe Biden announced he was joining US allies in closing the country’s air space to Russian aircraft. In an annual State of the Union speech, Biden said he would try to cushion Americans against the impact of higher oil prices. “I will use every tool at our disposal to protect American businesses and consumers,” Biden said.
On Wall Street, the Dow Jones Industrial Average lost 1.8 per cent on Tuesday. The Nasdaq composite slid 1.6 per cent.
In Asia, the Nikkei 225 in Tokyo lost 1.7 per cent to 26,393.03 and the Shanghai Composite Index shed 0.1 per cent to 3,484.19. India’s Sensex gave up 2.1 per cent. The Hang Seng in Hong Kong sank 1.9 per cent to 22,334.14. In Seoul, the Kospi gained 0.5 per cent to 2,712.97.
Sydney’s S&P-ASX 200 added 0.3 per cent to 7,116.70 after government data showed Australia’s economy grew by 3.4 per cent in the final three months of 2021 over the previous quarter and consumer spending was strong.
Economists said Asian economies are less exposed to the war than Europe but those that need imported oil will be hit by rising global prices, adding to inflationary pressures and depressing business and consumer activity.
Moscow’s attack on Ukraine and Russian threats of retaliation in response to Western sanctions also have roiled global markets for wheat and other commodities.
Russia is the No 2 global crude exporter, behind Saudi Arabia. Any potential disruption in supply could boost prices and add to persistent inflation pressures around the world.
Prices of wheat, of which both Russia and Ukraine are important exporters, have risen more than 20 per cent over one month ago.
Investors shifted money into the safe haven of government bonds, pushing up their market price and narrowing the yield, or the difference between the current price and the payout at maturity.
The yield on the 10-year Treasury was steady at 1.73 per cent after falling on Tuesday by an unusually wide margin from Monday’s 1.83 per cent.
The dollar gained to JPY115.18 from Tuesday’s JPY114.86. The euro declined to USD1.1093 from USD1.1123.
