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Hong Kong: Asian markets fell on Friday as investors resumed selling shares against the backdrop of the war in Ukraine after the recovery of the previous day, affected by the rise in inflation in the United States at an unprecedented level in 40 years, while European stock exchanges started their sessions on the rise.
Bets that the US Federal Reserve will take a more hawkish approach to controlling price rampages have exacerbated jitters in stock markets, while the failure of high-level talks between Kyiv and Moscow to de-escalate the war torpedoed the markets’ brief recovery.
But oil rose slightly in an attempt to reach again the unprecedented prices in 14 years, which it reached this week, at a time when governments are moving diplomatically in search of an alternative to production, which has been affected by the strict sanctions and ban on Russian exports.
As the war raged on the side of Eastern Europe, investors’ attention was focused on data released Thursday showing that the inflation rate in the United States reached 7.9 percent in February, the highest rate since January 1982.
The numbers come ahead of the upcoming Federal Reserve meeting to discuss its policies, during which the US Central Bank is expected to announce the first interest rate hike for this year. The Federal Reserve may raise interest rates a maximum of seven times this year.
Although monetary policy tightening is certain, there is still plenty of speculation about how often and how many rate hikes will be announced.
general inflation
The Ukrainian war has exacerbated the difficulties for officials, as high oil prices will increase pressure on consumer prices. But the Fed will have to balance fighting inflation with trying to prevent a recession.
Rodrigo Cattrell of the National Australia Bank said, “The most notable headline was (rising consumer prices) to their highest level in 40 years, reflecting rising costs of fuel, food and housing. With energy prices now rising after the Russian invasion of Ukraine and sanctions, they are expected to rise Inflate more.”
“The obvious result is that inflation pressures in the United States are proving to be more stable and broad, which increases pressure on the Federal Reserve to raise the funding rate and calm the economy,” he added.
US Treasury Secretary Janet Yellen acknowledged that price hikes were a problem and that annual inflation was likely to remain at a rate “too uncomfortably high”.
On Thursday, the European Central Bank raised its inflation forecast for the current year and lowered its forecast for economic growth, while taking a more hawkish stance in its policy.
The prospect of higher borrowing costs in the US while Japan is unlikely to raise its rate anytime soon, pushed the dollar against the yen to a five-year high of 116.74 yen. This came despite the fact that the yen usually improves in times of crisis due to its value as a safe haven.
global stock exchanges
All three US stock indices closed lower, after witnessing a strong improvement the previous day, while the scene was similar in Asian markets, which rebounded somewhat on Thursday, despite not compensating for losses in some markets.
The Tokyo Stock Exchange recorded a decline of more than 2%, while Hong Kong fell 1.8 percent. The Sydney, Seoul, Taipei, Manila, Jakarta, Bombay, Kuala Lumpur and Wellington stock markets also fell.
But the Shanghai, Bangkok and Singapore stock exchanges managed to achieve small gains, while the stock indices in London, Paris and Frankfurt recorded an increase with the start of their trading.
The “Dax” index on the Frankfurt Stock Exchange rose 0.4 percent to 13,495.16 points, and the “CAC 40” in Paris rose 0.4 percent to 6230.77.
Outside the euro zone, the FTSE-100 index in London advanced 0.8 percent to 7,158.73 points, following news of a pickup in growth in the United Kingdom.
Stéphane Michel of Federated Hermes saw some positive signs.
He said in a comment, “Although the markets suffered from the worst start in memory, the prevailing feeling is that they are conducting their dealings in an orderly, albeit volatile manner, with support and temporary buying at lower cost levels.”
He continued, “Any positive rumor or announcement is met with enthusiasm and fear of losing the opportunity…but from time to time, we are reminded of the possibilities of military escalation, stagflation, supply chain disruptions, sanctions, energy embargoes, etc., and we head lower. What is clear is that there is little agreement or certainty about the direction in which We should follow him.”
oil prices
Oil prices have been a main driver of extreme fluctuations in the markets since the Russian invasion, as Brent recorded less than $110 a barrel, after hitting a 14-year high of $139 on Monday, following Washington’s announcement that it would impose a ban on Russian crude.
Oil fell by about eight percent compared to the previous week, at a time when efforts to find alternative energy sources clouded the markets. However, observers warned that prices may rise again, and some even expected that the price of a barrel would reach $250 at some point.
“It’s been a very volatile week for oil, and some are eagerly awaiting its end,” said Stephen Innes of SBI Assets Management.
He added, “There is still talk behind the scenes that it will prove the success of diplomatic efforts to open the door to alternative sources of supply, while it seems that Saudi Arabia, the UAE and Iran are the most likely candidates.”
He stressed, “Russia still poses the greatest danger to oil, and the possibility of production loss, oil prices will remain high.”