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Asian Stocks Down, Ukraine Conflict Continues to Drive Oil Rally

By Gina Lee – Asia Pacific stocks were mostly down on Tuesday morning. A downward trend continues as a seemingly limitless rally in oil prices leads to concerns about inflation and the resultant impact on economic growth.

Japan’s Nikkei 225 was down 0.28% by 9:23 PM ET (2:23 AM GMT). Data released earlier in the day showed that the current account was JPR1.189 trillion ($10.33 billion) in January 2022, while the adjusted current account was JPY0.19 trillion.

South Korea’s KOSPI fell 0.55%

In Australia, the ASX 200 was down 0.33%, with the National Australia Bank business confidence index at a better-than-expected 13 in February.

Hong Kong’s Hang Seng Index was up 0.37%

China’s Shanghai Composite fell 0.60% and the Shenzhen Component was down 0.26%. China will release its consumer and producer price indexes on Wednesday.

The S&P 500 fell 3%, its worst drop since 2020, while an index of Chinese stocks traded in the U.S. dropped to its lowest level since 2016. Australian and New Zealand bonds fell, while U.S. Treasuries edged up after falling during the previous session.

Oil continued an upward trend after closing near a 14-year high on Monday. European gas, nickel, and wheat also climbed to record levels as the Russian invasion of Ukraine continues to drive concerns about supply disruption. The U.S. is also looking to bar imports of Russian oil, while Russia threatened to cut natural gas supplies to Europe via the Nord Stream 1 pipeline in response.

Central banks are also looking to tighten their monetary policies, adding to the challenge. The gap between two-year and 10-year U.S. Treasury yields is the smallest since March 2020, a warning sign of smaller growth prospects.

“It’s all about slowing growth and rising inflation,” Rock Creek co-chief investment officer Alifia Doriwala told Bloomberg. “With the sanctions on Russia intensifying, it’s hitting all sectors. Then you are going to have some central bank action amidst much uncertain economic growth.”

Russian and Ukrainian officials held talks on Monday to negotiate a ceasefire, which did not make much progress. The talks will continue, but Russian President Vladimir Putin has warned that Ukraine must agree to his demands for the conflict to end.

Meanwhile, JPMorgan Chase & Co. (NYSE:JPM) will remove Russian bonds from all its widely tracked indexes. Rating firm Fitch also suspended its commercial operations in Russia.

Bitcoin was near the $38,000 mark, as investors await U.S. President Joe Biden’s executive order outlining his administration’s strategy for the cryptocurrency sector. Biden is set to sign the order later in the week.

In central bank news, Reserve Bank of Australia Governor Philip Lowe will speak on Wednesday and Friday, while the European Central Bank hands down its policy decision on Thursday.

The U.S. will release its consumer price index on Tuesday, while Apple Inc. (NASDAQ:AAPL) will hold its new product event later in the day.

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