Stocks slip, oil blasts past $ 110 as Russia sanctions bite

A broker reacts while trading at his computer terminal at a stock brokerage firm in Mumbai, India, February 1, 2020. REUTERS / Francis Mascarenhas

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  • MSCI Asia ex-Japan -0.56%, Nikkei -1.68%
  • Euro Stoxx, DAX futures point to lower open
  • Brent crude surges above $ 110, highest since early July 2014
  • Biden announces ban on Russian flights using American airspace
  • US yields rebound from eight-week lows

SHANGHAI, March 2 (Reuters) – Asian stocks came under renewed pressure on Wednesday and the price of oil surged past $ 110 per barrel as investors worried about the impact of aggressive sanctions against Russia for invading Ukraine.

European bourses were set for a weak open after Tuesday’s drubbing, with Euro Stoxx 50 futures down 0.13% and German DAX futures 0.17% lower in early deals. FTSE futures rose 0.34%.

In the latest tightening of restrictions on Moscow, the United States banned Russian flights using American 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 speech on Tuesday, in which he also said Russian President Vladimir Putin would “pay a continuing high price” for the invasion of Ukraine. read more

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS)fell 0.56% with China’s blue-chip CSI300 (.CSI300) index 1.12% lower.

Japan’s Nikkei (.N225) fell 1.68%.

In Australia, the benchmark ASX 200 (.AXJO) index gained 0.28% despite the risk-off mood elsewhere as rising commodity prices lifted miners’ shares.

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“The Russia-Ukraine conflict will probably continue to dominate markets for the foreseeable future. The announcement yesterday that Russia will not pay coupons to foreign holders on its government debt should push investors further into safe-havens,” ING analysts said in a note.

“Support for starting the EU membership process for Ukraine shows the unity of support for Ukraine from Western Europe but is unlikely to help calm tensions.”

On Tuesday, the S&P 500 (.SPX) and Nasdaq Composite (.IXIC) indexes closed about 1.6% lower, while the Dow Jones Industrial Average (.DJI) dropped nearly 1.8%.

Global sanctions against Russia have prompted a string of major companies to announce suspensions to or exits from their businesses in the country.

Exxon Mobil (XOM.N) said on Tuesday that it will exit Russia 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 the price of oil continues to climb. On Wednesday, global benchmark Brent crude blew past $ 110 per barrel, rising more than 5.8% to $ 111.09, its highest since early July 2014.

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

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

“We think that there is some room still for oil prices to continue to climb,” said Carlos Casanova, senior Asia economist at UBP in Hong Kong. “So much of it depends upon political factors and making sure that some of the supply coming out of Russia is offset with (not just) more oil from US shale, but also 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 a day earlier.

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

The greenback’s rise came as US Treasury yield rebounded after dropping to eight-week lows on Tuesday. A shifting global growth outlook has seen investors trim bets that the Federal Reserve will aggressively hike interest rates in the coming months.

The benchmark US 10-year yield rose to 1.7309% from 1.711% late on Tuesday and the policy-sensitive 2-year yield rose to 1.3205% from 1.305%.

Fed funds futures markets now price only a 5% chance of a 50 basis point hike at the Fed’s March meeting, though a smaller 25 basis point hike is seen as a virtual certainty. FEDWATCH

In his speech on Tuesday, Biden called for companies to make more cars and semiconductors in the United States so Americans would be less reliant on imports, as a way to battle inflation.

Gold, which touched an 18-month high last week and had surged nearly 2% on Tuesday over the worsening Ukraine crisis, gave back 0.57% to $ 1,932.11 per ounce as the dollar firmed.

Bitcoin, which had soared nearly 15.5% Tuesday on strengthening conflict currency credentials read more, was 0.23% lower at $ 44,341.68.

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Reporting by Andrew Galbraith; Editing by Sam Holmes

Our Standards: The Thomson Reuters Trust Principles.

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