Stocks fall as investors reduce risk on Ukraine tensions

Content of the article

SINGAPORE — Asian markets fell on Friday and gold hit an eight-month high after an exchange of fire in eastern Ukraine and fresh US warnings of an impending Russian invasion prompted investors to seek safety before the weekend.

MSCI’s broadest index of Asia-Pacific stocks outside Japan, , fell 0.3% in early trading. The Japanese Nikkei fell 1.4%. Korean stocks and Australian stocks each fell 1%.

On Wall Street overnight, the Dow’s 1.8% drop was its worst session of the year, the S&P 500 fell 2.1% and the Nasdaq 2.9%. Gold hit an eight-month high of $1,900 an ounce and held on to its gains.

Content of the article

“The market will be on high alert for the possibility of a Russian invasion next week once the Beijing Olympics are over,” analysts at ANZ Bank said in a note.

Russian-backed rebels and Kiev forces traded accusations that each had fired across a ceasefire line on Thursday and US President Joe Biden said he felt a Russian invasion “will happen in the next few days”.

Investors fear a wider war as one of the deepest crises in post-Cold War relations unfolds, with Russia wanting security guarantees, including Ukraine’s NATO membership.

Overnight safe-haven currencies such as the Japanese yen and Swiss franc hit two-week highs against the dollar, with the yen advancing a little further in Asia to 114.84 to the dollar.

Content of the article

Treasuries rallied with the benchmark 10-year yield down seven basis points (bps) overnight and another two at the start of Tokyo trade at 1.9493%. Two-year yields also fell 2 basis points to 1.4436% in Asian trading.

The measures reverse the initial relief that swept through asset prices with Russian statements about withdrawing some of its troops from border regions although oil, which had surged at the tense moments of the crisis, fell during the week .

Brent crude futures were last flat at $92.97 a barrel, about 4% below Monday’s peak, and U.S. crude hovered at $91.63 a barrel.

RACE RATES

With concerns over the conflict in Ukraine come markets already reeling from a rate outlook that could hold up to seven Federal Reserve hikes in the coming year.

Content of the article

St. Louis Fed Chairman James Bullard reiterated his call on Thursday to raise the federal funds rate to 1% by July to combat stubbornly high inflation and the price of federal funds futures. has about a 1/3 chance of a 50 basis point hike next month to start .

Cleveland Fed President Loretta Mester said the pace of increases will need to be faster than previous cycles.

“Markets have been particularly volatile recently and virtually everyone has adjusted their Fed higher calls,” said NatWest Markets strategist Jan Nevruzi.

“The consensus seems to be between 5 (our view) and 7 (at each meeting) hikes and I believe the right number is somewhere in between. Given the strong growth trend and high inflation, it wouldn’t be too surprising to see an uptick in every meeting from now on,” Nevruzi said.

On Friday, Japan reported a fifth straight month of inflation, with energy prices posting their biggest annual rise in 41 years.

Elsewhere in the currency markets, the dollar maintained its offer and remained firm at $1.1359 for a euro and $0.7181 for an Aussie.