Wall Street stock markets struggled for direction on Friday, after Moscow-backed separatists in eastern Ukraine announced a “mass evacuation” of civilians to Russia but the Kremlin said it was open to talks.
The S&P 500 was up 0.2 per cent in recent trading, having closed more than 2 per cent lower on Thursday after President Joe Biden said there was a “very high risk” of a Russian invasion of Ukraine. The technology-focused Nasdaq Composite moved between small gains and losses, ahead of a long weekend in the US.
Meanwhile, Brent crude, the international oil benchmark, fell 1 per cent to $91.97 a barrel after touching a seven-year high this week.
Financial markets have swung sharply over the past week as developments in Ukraine added to fears of potential sanctions against Russia that could exacerbate inflation and prompt western central banks to tighten monetary policy.
Russia is one of the world’s largest oil producers and a leading commodities exporter. Inflation has surged to a 40-year high in the US, and markets are tipping the Federal Reserve to raise interest rates more than six times this year.
“If there were an invasion then we know for sure the oil price will go higher, that’s inflationary, and that will make the Fed a bit more aggressive,” said Marija Veitmane, senior strategist at State Street.
“So that’s the transmission mechanism between these geopolitical risks around Russia and global markets.”
On Friday, Moscow-backed separatists in eastern Ukraine cited increased shelling on the front lines as they outlined plans for evacuation, adding to beliefs that Russia is planning an invasion.
Moscow unveiled plans for nuclear drills to test its ballistic and cruise missiles, while also saying it would engage in talks in a bid to resolve the Ukraine crisis through a security agreement.
Russia’s Moex share index fell 2.7 per cent on Friday, following a 3.7 per cent loss in the previous session. The rouble lost 0.2 per cent against the dollar.
Europe’s regional Stoxx 600 share index fell 0.3 per cent, Germany’s Xetra Dax lost 1 per cent and the UK’s FTSE 100 traded flat.
Lale Akoner, senior market strategist at BNY Mellon Investment Management, said stock markets were likely to remain under pressure until geopolitical risk receded.
“The market has been pricing in the economic implications if sanctions were implemented on Russia,” she said.
If an invasion did not occur, she added, “then oil prices fall, commodities prices and precious metals go down and equities will go higher as risk sentiment improves.”
In Asia, Hong Kong’s Hang Seng index dropped 1.9 per cent as Chinese technology stocks fell sharply. The moves came after the National Development and Reform Commission, Beijing’s top state planning agency, urged online food delivery platforms to lower the fees they charge restaurants.
Shares in food platform Meituan dropped almost 15 per cent. Hong Kong shares of internet holding company Alibaba, which owns food delivery platform Ele.me, fell 2.9 per cent.
In government bond markets, the yield on the benchmark 10-year US Treasury note, which moves inversely to its price and underpins borrowing costs worldwide, fell 0.03 percentage points to 1.94 per cent.
Germany’s equivalent Bund yield dipped 0.03 percentage points to 0.21 per cent.
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2022-02-18 13:56:20Z
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