Asian markets plunged, while oil and haven assets rallied yesterday after Russian President Vladimir Putin ordered troops into two regions in eastern Ukraine, ramping up geopolitical tensions and fears of a conflict.
Investors were sent running after Putin recognized the independence of two rebel-held areas of Donetsk and Lugansk and sent in “peacekeeping” forces.
The move came hours after the Kremlin appeared to pour cold water on a potential summit with US President Joe Biden, and led to condemnation from world leaders and warnings Moscow would be hit with sanctions.
The prospect of war and strict sanctions sparked concerns about the effect on supplies of a range of commodities from the region, including oil, wheat and nickel.
Crude — already up more than 25 percent this year on surging demand — rose higher still, with Brent closing in on the US$100 mark for the first time since 2014.
Hopes of an Iran nuclear deal, which could see Tehran resume global oil exports, were unable to temper the gains.
The jump in oil is compounding worries about inflation around the world, with the US Federal Reserve facing pressure to tighten monetary policy to prevent prices from running out of control.
Natural gas traded in the Netherlands surged as much as 13 percent, as a conflict could threaten Russian gas supplies to Europe, about one-third of which typically travel through pipelines crossing Ukraine.
That has in turn battered equity markets in the past few months and the latest developments out of Europe led to another day of hefty selling in Asia.
Taipei, Mumbai, Shanghai, Sydney, Seoul and Tokyo fell at least 1 percent, while there were also losses in Bangkok, Jakarta, Singapore and Wellington.
Hong Kong tanked more than 3 percent at one point owing to a selloff in tech firms as traders again fret over the possibility that China will embark on another crackdown on the sector.
Those fears were fueled by a report that regulators had ordered a probe into state firms’ links with Alibaba Group Holding Ltd’s (阿里巴巴) fintech arm Ant Group Co (螞蟻集團).
The territory’s struggle to contain a COVID-19 outbreak has also hit sentiment in Hong Kong as leaders impose containment measures.
“It’s a fluid situation in the evolving geopolitical thematic we see before us,” Pepperstone Financial Pty research head Chris Weston said. “Traders are currently playing defense as lower liquidity, driven by the US Presidents Day holiday, [exacerbates] moves.”
The uncertainty on trading floors was also pushing safe havens higher, with gold climbing past US$1,900 and heading for a one-year high, while the yen was also stronger against the US dollar.
However, the greenback was sharply higher against other currencies, including a 4 percent gain on the ruble.
The Russian unit’s drop came as the Moscow Exchange plunged 10 percent.
Commentators warn of further declines if Putin invades Ukraine.
“Uncertainty still rules,” TD Securities Inc head of strategy Cristian Maggio said before Putin’s recognition of the rebel regions. “In the case of armed conflict, Russian assets will weaken substantially more than now.”
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