Asian stocks were in retreat on Friday and oil rose again as news that Europe’s biggest nuclear power plant had been hit by Russian shelling fuelled a flight to safety and ramped up fears about the Ukraine war.
As Vladimir Putin’s forces stepped up their invasion, Ukraine’s foreign minister demanded an immediate ceasefire to avoid disaster at the Zaporizhzhia plant after its power unit was hit.
While Ukrainian authorities said a fire that broke out had been extinguished and no radiation leak had been detected, traders remain on edge.
Moscow has been pressing ahead with its incursion into its neighbour that has sent global markets spiralling and commodities such as wheat, metals and particularly oil soaring. That has, in turn, fuelled concerns the global recovery from Covid-19 will be derailed.
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Tokyo and Hong Kong led losses across Asia while Sydney, Shanghai, Seoul, Singapore, Mumbai, Taipei, Manila, Bangkok and Wellington were also well down.
The benchmark Nikkei 225 index was down 2.23% or 591.80 points at 25,985.47, while the broader Topix index fell 1.96% or 36.86 points to 1,844.94.
The Hang Seng Index sank 2.50%, or 562.05 points, to 21,905.29. The Shanghai Composite Index dropped 0.96%, or 33.46 points, to 3,447.65, while the Shenzhen Composite Index on China’s second exchange shed 1.28%, or 29.44 points, to 2,264.64.
London, Paris and Frankfurt opened deep in the red and the dollar dipped against the safe-haven yen though it rose against most other currencies, including sitting at its highest level against the euro since mid-2020.
Gold – a go-to asset in times of uncertainty – was also up.
Crude Contracts Rise Again
At the same time, both main crude contracts rose, having retreated on Thursday partly on hopes for an Iran nuclear deal that would allow Tehran to restart exports to the world market. However, they were off their earlier highs in afternoon Asian trade.
While world governments have not included Russian oil in their wide-ranging sanctions on Moscow owing to concerns about the impact on prices and consumers, trade has become increasingly tough as banks pull financing and shipping costs rise.
On Friday, the China-backed Asian Infrastructure Investment Bank (AIIB) announced that it will suspend business related to Russia and its neighbour Belarus, saying it was “in the best interests of the bank.”
“The headlines about the Russian shelling of that nuclear plant are clearly driving a flight to quality trade,” Chamath de Silva at BetaShares Holdings in Sydney said. “It’s classic risk-off right now.”
Others pointed out that the war has exacerbated selling by profit-takers after world markets enjoyed a near two-year rally thanks to pandemic-era financial support.
Macron Says ‘Worst To Come’
Meanwhile, French President Emmanuel Macron said he fears the “worst is to come” after a conversation with Putin, who has said he intends to topple the government in Kyiv.
The conflict further complicates attempts by governments and central bankers to bring down soaring inflation, which has been fanned by Covid stimulus packages as well as elevated energy costs and supply chain snarls.
Federal Reserve boss Jerome Powell said this week he intends to raise interest rates this month, though he tempered expectations of a half-point rise and instead indicated a considered approach to tightening policy.
“Rising commodity prices are a big concern for the market, prompting fears of stagflation,” Fiona Cincotta of City Index said.
“The economic clinch point of this war is commodity prices. Higher energy prices, slowing growth, and surging inflation are not a good outlook.”
CMC Markets analyst Michael Hewson also sounded a note of gloom, saying: “If the current environment prevails things are unlikely to improve, which means that anything short of a ceasefire could see prices head even higher from where they are now.”
Key figures around 0820 GMT
Tokyo > Nikkei 225: DOWN 2.2% at 25,985.47 (close)
Hong Kong > Hang Seng Index: DOWN 2.5% at 21,905.29 (close)
Shanghai > Composite: DOWN 1.0% at 3,447.65 (close)
London > FTSE 100: DOWN 0.6% at 7,195.64
Brent North Sea crude > UP 1.2% at $111.77 per barrel
West Texas Intermediate > UP 1.8% at $109.60 per barrel
New York > Dow: DOWN 0.3% at 33,794.66 (Thursday close)
- AFP with additional editing by Sean O’Meara
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