Although global shares have clawed back some losses from the Russian invasion, other investors are questioning the gains’ durability
Asia Pacific stocks were mostly up on Monday morning, as the war in Ukraine sparked by Russia’s invasion on Feb. 24 enters a second month. The risk of an economic downturn from tightening U.S. monetary policy is also weighing on markets.
Japan’s Nikkei 225 was down 0.41% by 3:27 AM GMT while South Korea’s KOSPI inched up 0.07%.
In Australia, the ASX 200 gained 0.45%.
Hong Kong’s Hang Seng Index rose 1.01%.
China’s Shanghai Composite edged up 0.19% while the Shenzhen Component fell 0.68%, with Shanghai locking down to curb rising numbers of COVID-19 cases.
U.S. Treasuries were mixed after a bond rout, triggered by fears that the U.S. Federal Reserve will hike interest-rate to curb inflation. The 10-year U.S. Treasury yield fell but remained above a technical trend line that has effectively served as a ceiling since the late 1980s. Bonds also fell in Australia and New Zealand.
Commodities supply chains continue to be disrupted by the war in Ukraine, alongside the trend towards tighter central bank monetary policies. Investors are pricing in two full percentage points of Fed rate rises for the rest of the year, which has led to further volatility in the stocks, bonds and currencies markets.
The Fed is trying to create a Goldilocks scenario by engineering a soft landing, Nuveen chief investment officer Saira Malik told Bloomberg. The equity markets are buying it and the bond markets aren’t.
Malik added she expects only a moderate impact on global growth from the war, as economic expansion will be strong enough to overcome inflation.
Although global shares have clawed back some losses from the Russian invasion, other investors are questioning the gains’ durability.
It may be that what we’re seeing is more a bear-market rally, Pepperstone Financial Pty head of research Chris Weston said in a note. Investment flows related to portfolio rebalancing at the end of March 2022 and the first quarter could lead to big and questionable moves, the note added.
