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Monday, July 4, 2022
Stocks & Shares

Global stocks tumble while oil surges amid Ukraine crisis

Global stocks tumble

MSCI’s broadest index of Asia Pacific shares outside Japan shed 1.66%, Nikkei dropped 1.7%, S&P 500 futures fell 1.4%, Nasdaq futures shed 1.9%, Euro Stoxx 50 futures fell 1.1%, and FTSE futures dropped 0.6%

Global stocks tumbled while safe-havens rallied and oil surged on Tuesday as Europe’s eastern flank stood on the brink of war after Russian President Vladimir Putin ordered troops into breakaway regions of eastern Ukraine.

MSCI’s broadest index of Asia Pacific shares outside Japan was on course for its worst day for this month, off 1.66%, weighed by markets in Hong Kong and mainland China. Japan’s Nikkei dropped 1.7%.

U.S. and European markets were also braced for sharp losses at the opening bell, with S&P 500 futures down 1.4%, Nasdaq futures off 1.9%, the pan-region Euro Stoxx 50 futures 1.1% lower, and FTSE futures down 0.6%.

Both Asian shares and U.S. and European futures had fallen more earlier in the session.

In contrast, Brent crude futures gained 2.1% to $97.44, a new seven-year high, on worries Russia’s energy exports could be disrupted. Spot gold advanced 0.1% to $1,908.10, having earlier hit a new six-month top of $1,913.89.

Following Russia’s latest move ‘we are much closer to military intervention, which of course is going to drive a lot of the risk off sentiment in the markets, said Carlos Casanova, senior Asia economist at UBP, adding the short term volatility in markets caused by both geopolitical factors and the U.S. Federal Reserve was ‘relentless’.

Casanova said the consequences would be higher oil prices, an equity sell off, and people flocking to safe haven assets like the Japanese yen.

In Hong Kong, shares of Russian aluminium producer OK Rusal slumped 22.1% to HK$6.18 ($0.79), their biggest daily percentage decline since April 2018.

Hong Kong-listed Chinese tech stocks dropped 2.3%, with heavyweights Tencent and Alibaba both hit by speculation about a new wave of regulatory scrutiny.

In currency markets, moves were more muted, barring the Russian rouble which hit an 15-month low early in Asian trading, before steadying.

The Japanese yen walked back early gains which had taken it to a near three-week high of 114.48 per dollar, fellow safe-haven the Swiss franc was holding steady near the previous day’s one-month high, and the euro recovered to trade flat after earlier falling to a one-week low of $1.1286.

Currency markets are not really showing the same level of caution as equity markets, said Matt Simpson, senior market analyst at City Index.

When you read the headlines you’d expect to see some follow-through in the markets. We are in equities but we’re not in currencies, he said.

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