On Wednesday, the Asian stock market was under pressure. The crude oil prices surged past $110 per barrel as shareholders are worried about the repercussions of aggressive sanctions against Russia for its invasion of Ukraine. The European market expects to open weak after Tuesday’s drubbing. The Euro Stoxx 50 Futures 0.13% down and the DAX Futures down by 0.17% in the early trading session. The FTSE 100 futures increased by 0.34%.
Recently, The United States tightened its sanctions against Moscow (Capital of Russia) by banning Russian aircraft from American airspace, following similar moves by the Canada and European Union. On Tuesday, American President Joe Biden declared the ban in his State of the Union address. During this speech, he also states, “Russian President Putin will pay a high price for the invasion of Ukraine.”
The Morgan Stanley Capital International (MSCI) is the most extensive Asian-Pacific share outside Japan, down by 0.56%, while China’s CSI300 index is at a 1.12% lower level. Japan’s Nikkei index was down by 1.68%. In Australia, the ASX 200 Benchmark Index rose 0.28% even with the risk-off of various global sentiments, including rising commodity prices, which helps lift a few shares.
The ING analyst states in a note, “The Russia- Ukraine crisis is likely to remain a major factor in markets in the near future. According to yesterday’s announcement, Russia is not paying coupons to the foreign investors on its government debt should push investors further into safe- havens”. On Tuesday, the S&P 500 and Nasdaq Composite indexes closed around 1.6% lower, while The Dow Jones Industrial Average dropped almost 1.8%.
The global restrictions on Russia have prompted major organizations to announce suspensions or exit from their businesses within the country. On Tuesday, the Exxon Mobil Corporation, the natural gas company, said it would be leaving Russian operations, including oil production fields. A similar decision was made by the big oil companies Norwegian’s Equinor ASA and BP PLC, and Shell. Exxon Mobil Corporation’s announcement comes when oil prices continue to rise.
On Wednesday, the global benchmark Brent crude oil surpasses $110 per barrel, increasing more than 5.8% to $111.09, which is the highest price since the beginning of July 2014. U.S. West Texas Intermediate crude surged almost 6% to $109.30, the highest level since September 2013.
Carlos Casanova, Senior Economist, Asia at UBP in Hong Kong, states, “We believe there is plenty of room for oil prices to rise.” He also said, “So the majority of this will depend on the political factors and ensuring that some of the oil supply coming from Russia offset with more oil supply from the U.S. shale and Iran.”
In the currency market, the dollar gained 1.88% against the Russian rouble to 107.01 KWD after hitting 117 earlier in the day. The dollar is more robust against the yen, which is at a 115.03 level, up by 0.12%. The euro fell to $1.1112. Compared to other major trading partners, the dollar firmed at 0.15% to 97.464 levels.
The increase in the greenback occurred because the U.S. Treasury yield rebounded after dipping to lows of eight weeks on Tuesday. Investors have reduced their wagers on the Federal Reserve raising interest rates quickly in the coming months as the global growth picture has changed. The United States 10-years Bond Yield increased by 1.7309% from 1.711% at the end of Tuesday. The policy-sensitive 2-year yield rose by 1.3205 % from 1.305%.
Currently, the Fed Future Funds markets have a 5% possibility of 50 basis-point hikes in the Fed’s March meeting, though 25 basis-point hikes are seen as a near possibility. On Tuesday, Bitcoin jumped around 15.5% based on strengthening credibility as a conflict currency, and it was 0.23% lower level $44,341.68. Last week, Gold raised its 18-month high record level and jumped around 2% on Tuesday. Due to the increasing Russia-Ukraine crisis, Gold returns to 0.57% in the range of $1,932.11 per ounce, strengthening the dollar.
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