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Asian Stocks Down, Ukraine Crisis Continues

By Gina Lee – Asia Pacific stocks were down on Thursday morning, with the focus squarely on the crisis in Eastern Europe. Separatists in eastern Ukraine have asked Russian President Vladimir Putin for help, which could mean Russian troop deployments.

Japan’s Nikkei 225 was down 0.89% by 9:49 PM ET (2:49 AM GMT)

South Korea’s KOSPI fell 1.71%, with the Bank of Korea keeping its interest rate unchanged at 1.25% as it handed down its policy decision earlier in the day.

In Australia, the S&P/ASX 200 slid 2.42%.

Hong Kong’s Hang Seng Index fell 1.87%.

China’s Shanghai Composite was down 0.26% and the Shenzhen Component edged down 0.17%.

Separatist leaders from Ukraine’s Donetsk and Luhansk regions, or Donbass (Donbas)), have sought Russian help to repel Ukrainian forces. Russia’s upper house, the Federation Council, recently gave Putin unanimous approval to deploy “peacekeepers” to the Donbas and potentially into other parts of Ukraine. However, Russia continues to deny U.S. warnings that it plans to invade Ukraine.

The West has also expanded sanctions against Russia, with the U.S. joining German sanctions on the Nord Stream 2 gas pipeline linking Russia and Germany.

Worries that commodity prices will be impacted by the situation in Ukraine continue to drive high inflation and could force central banks to tighten monetary policy further.

Oil was up on Thursday, with investors calculating the potential risks to Russian energy exports against the potential release of some strategic reserves to restrain prices.

“Expect volatility to really persist in the next few months,” BNY Mellon (NYSE:BK) Investment Management senior market strategist Lale Akoner told Bloomberg. Geopolitical risks are flaring at a “very inopportune time” since markets are grappling with receding stimulus support, she added.

Although Putin remains open to “diplomatic solutions”, Russia’s interests and security must be guaranteed, he insisted. Ukraine president Volodymyr Zelenskiy said his country poses no threat to Russia but would defend itself if attacked in an address to the nation.

Federal Reserve Bank of San Francisco President Mary Daly said she is monitoring the situation but has not yet seen anything that would prevent her from backing an interest-rate hike in March 2022.

“Policy mistakes at this point in time are almost guaranteed,” Banríon Capital Management president Shana Sissel told Bloomberg. “The question isn’t, is there going to be a policy mistake, but how bad will it be? Will the Fed hike too much too fast, will they front-load everything?”

Daly’s Fed colleagues, Loretta Mester and Raphael Bostic, will speak later in the day.

On the data front, U.S data, including the GDP and new home sales, is due later in the day. Further data, including durable goods orders, the PCE price index (PCE deflator), and University of Michigan consumer sentiment is due a day later.

Meanwhile, Alibaba (NYSE:BABA) Group Holding Ltd. (HK:9988) is expected to report a substantial drop in profit which could impact share prices.

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