October 2, 2022

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Stocks drop, oil crosses $110 as Russian sanctions impact

Stocks drop, oil crosses $110 as Russian sanctions impact

A broker interacts while trading on his computer at a stockbroking firm in Mumbai, India, February 1, 2020. REUTERS/Francis Mascarenhas

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  • MSCI Asia excluding Japan -0.56%, Nikkei -1.68%
  • Euro Stoxx and DAX futures indicate a lower open
  • Brent crude rose above $110, the highest since early July 2014
  • Biden announces a ban on Russian flights using US airspace
  • US yields rebounded from eight-week lows

SHANGHAI (Reuters) – Asian stocks came under renewed pressure on Wednesday, with oil prices jumping above $110 a barrel as investors worried about the impact of tough sanctions on Russia for its invasion of Ukraine.

European bourses were poised for a weak open after pulling back on Tuesday, with Euro Stoxx 50 futures down 0.13% and German DAX futures down 0.17% in early trades. FTSE futures are up 0.34%.

In the latest tightening of restrictions on Moscow, the United States has banned Russian flights that use US airspace, following similar moves by the European Union and Canada.

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US President Joe Biden announced the ban during his State of the Union address on Tuesday, in which he also said that Russian President Vladimir Putin would “continually pay a heavy price” for invading Ukraine. Read more

MSCI’s broadest index of Asia Pacific shares outside Japan (MIAPJ0000PUS.)It fell 0.56% with the Chinese CSI300 (.CSI300) The indicator is 1.12% lower.

Japan’s Nikkei Index (.N225) It fell 1.68%.

In Australia, the ASX 200 . standard (.AXJO) The index rose 0.28% despite risk-off sentiment elsewhere as higher commodity prices lifted mining stocks.

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“The Russian-Ukrainian conflict is likely to continue to dominate the markets for the foreseeable future,” ING analysts said in a note. “Yesterday’s announcement that Russia will not pay coupons to holders of foreign government debt will drive investors to safe havens.”

“Support for the start of the EU membership process for Ukraine shows unity of support for Ukraine from Western Europe but is unlikely to help de-escalate tensions.”

Tuesday, S&P 500 (.SPX) And the Nasdaq (nineteenth) The indices closed down about 1.6%, while the Dow Jones Industrial Average closed (.DJI) It fell nearly 1.8%.

Global sanctions against Russia prompted a series of major companies to announce the suspension or exit of their companies in the country.

ExxonMobil (XOM.N) It said on Tuesday it would exit Russian operations, including oil production fields, following similar decisions by British oil giants BP PLC and Shell, and Norway’s Equinor ASA. (EQNR.OL) Read more

Exxon’s announcement comes as oil prices continue to rise. On Wednesday, global benchmark Brent crude exceeded $110 a barrel, rising more than 5.8% to $111.09, its highest level since early July 2014.

US West Texas Intermediate crude jumped nearly 6% to $109.30, its highest level since September 2013.

The rise came despite a global agreement to release 60 million barrels of crude reserves in an attempt to stem price increases and mounting inflationary pressures.

“We believe there is still room for continued high oil prices,” said Carlos Casanova, UBP’s chief Asian economist in Hong Kong. “A lot of that depends on political factors and making sure that some of the supplies coming from Russia are offset by (not only) more US shale oil, but also from Iran.”

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In the currency market, the dollar rose 1.88% against the ruble to 107.01 after touching a record high of 117 the day before.

The dollar was also stronger against the yen, up 0.12% to 115.03, while the euro slipped to $1.1112. Against a basket of other major trading partners’ currencies, the dollar rose 0.15% to 97.464.

The US currency’s rally came as US Treasury yields rebounded after falling to an eight-week low on Tuesday. Changing global growth prospects have seen investors reduce their bets that the Federal Reserve will raise interest rates aggressively in the coming months.

The benchmark US 10-year yield rose to 1.7309% from 1.711% late Tuesday, and the policy-sensitive two-year yield rose to 1.3205% from 1.305%.

Fed fund futures markets are now pricing in only a 5% chance of a 50 basis point rise at the Fed’s March meeting, although the smaller 25 basis point rise is seen as a hypothetical certainty. FEDWATCH

In his speech on Tuesday, Biden called on companies to manufacture more cars and semiconductors in the United States so that Americans are less dependent on imports, as a way to fight inflation.

Gold, which touched an 18-month high last week and rose nearly 2% on Tuesday due to the worsening Ukraine crisis, brought back 0.57% to $1,932.11 an ounce as the dollar stabilized.

Bitcoin, which rose about 15.5% on Tuesday as the currency’s conflicting credentials bolstered Read more, was down 0.23% at $4,431.68.

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(Reporting by Andrew Galbraith) Editing by Sam Holmes

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