Asian Stocks Down, Investors Await “Next Move” in Ukraine Crisis

This post was originally published on this site – Asia Pacific stocks were mostly down on Monday morning, with Western countries slapping harsher sanctions on Russia in response to the latter’s invasion of Ukraine.

Japan’s Nikkei 225 was down 0.36% by 9:28 PM ET (2:28 AM GMT). Japan earlier in the day released data, including industrial production month-on-month and retail sales year-on-year for January 2022.

South Korea’s KOSPI was up 0.21%.

In Australia, the ASX 200 gained 0.48%. Australia also released data, including private sector credit and retail sales month-on-month for January, earlier in the day. The Reserve Bank of Australia will hand down its policy decision on Tuesday.

Across the Tasman Sea, New Zealand also released its ANZ business confidence index for February.

Hong Kong’s Hang Seng Index fell 0.92%.

China’s Shanghai Composite edged down 0.12% and the Shenzhen Component fell 0.71%.

The most recent sanctions will ban some Russian lenders from using the global SWIFT messaging system, while doubts are rising as to the Central Bank of the Russian Federation (Bank of Russia)’s ability to keep the Russian financial system and the rouble under control.

The SWIFT exclusion may leave holes in international banking that require monetary authorities to supply the market with dollars, according to Credit Suisse (SIX:CSGN) Group AG strategist Zoltan Pozsar.

The conflict is already driving prices of resources such as wheat, natural gas, oil, and metals up. Investors are now waiting to see how this will impact the U.S. Federal Reserve’s plans for interest rate hikes starting in March 2022.

“Markets will have to digest once again the next stage of this crisis,” Medley Global Advisors global macro strategist Ben Emons told Bloomberg. The sanctions have the effect of curbing market liquidity, he added.

Russian and Ukrainian officials will meet at the border with Belarus, but Ukrainian President Volodymyr Zelenskiy is skeptical about the talks.

In Russia, queues formed at cash machines across the country, with people withdrawing foreign currency as fears of a rouble collapse increased. S&P Global (NYSE:SPGI) Ratings also slashed Russian bonds to below investment grade on Friday.

Companies are also taking action, with BP (NYSE:BP) Plc exiting its shareholding in Russia’s Rosneft PJSC and Norway planning to remove Russian assets from its $1.3 trillion sovereign wealth fund.

The conflict is “likely to boost energy prices significantly, resulting in immediate inflationary effects and a large drag on global growth,” Federated Hermes (NYSE:FHI) senior economist Silvia Dall’Angelo said in a note.

“It’s fair to say that the crisis increases the room for central banks’ policy mistakes,” the note added.

In other central bank news, Fed Chairman Jerome Powell will testify before Congress on Wednesday and Thursday. The Bank of Canada hands down its policy decision on Wednesday, while the European Central Bank will release the minutes from its February 2022 meeting a day later.

U.S. President Joe Biden will deliver the State of the Union address on Tuesday, while the U.S. jobs report, including non-farm payrolls, is due on Friday.

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