Asian stocks rise, look to Ukraine, higher energy costs

Japan’s benchmark Nikkei 225 rose 1.4% to 27,202.05. Australia’s S&P/ASX 200 was up 0.9% to 7,341.10. South Korea’s Kospi rose 0.8% to 2,708.63

Japan’s benchmark Nikkei 225 rose 1.4% to 27,202.05. Australia’s S&P/ASX 200 was up 0.9% to 7,341.10. South Korea’s Kospi rose 0.8% to 2,708.63

Asian equities traded higher on March 22 as investors eyed the war in Ukraine and inflationary risks including rising energy costs. Benchmarks rose in Japan, South Korea, Australia and China.

The Russian war on Ukraine and Western sanctions on Russia are raising concerns about energy disruptions to Europe and rising prices that could hamper progress in the economic recovery from the pandemic.

“With no progress on peace talks, reports are circulating that the EU is setting the table for a Russian oil embargo. Higher energy prices will hurt the EU economy enormously,” said Stephen Innes, Managing Partner at SPI Asset Management.

Benchmark U.S. crude rose $2.89 to $115.01 a barrel in electronic trading on the New York Mercantile Exchange on Tuesday. Brent, the international standard, rose $3.78 to $119.40.

Japan’s benchmark Nikkei 225 rose 1.4% to 27,202.05. Australia’s S&P/ASX 200 was up 0.9% to 7,341.10. South Korea’s Kospi rose 0.8% to 2,708.63. Hong Kong’s Hang Seng rose 1.8% to 21,606.53, while the Shanghai Composite erased earlier losses and rose 0.3% to 3,263.83.

Hong Kong-traded shares of e-commerce giant Alibaba Group rose 8% after the company increased a share buyback from $15 billion to $25 billion on Tuesday to prop up a share price that had fallen by more than half has fallen since the ruling Communist Party tightened control over tech industries by launching official crackdowns.

Stocks ended slightly lower on Wall Street on Monday after recovering for most of the day, and bond yields rose sharply after Federal Reserve Chair Jerome Powell said the central bank was ready if needed to be more aggressive to curb inflation. The yield on the 10-year government bond rose to 2.30% from 2.14% late Friday.

The S&P 500 fell less than 0.1% to 4,461.18, marking a four-day winning streak for the benchmark index. The Dow fell 0.6% to 34,552.99 and the Nasdaq fell 0.4% to 13,838.46. Smaller company stocks underperformed the broader market. The Russell 2000 Index lost 1% to 2,065.94.

Speaking to the National Association of Business Economists, Mr Powell said the Fed will raise its short-term benchmark interest rate by half a point at multiple Fed meetings if necessary to rein in inflation. The Fed has not raised interest rates by half a point since May 2000.

On Wednesday, the central bank announced a quarter-point rate hike, the first since 2018. Stocks rallied after the announcement and had their best week in more than a year. The central bank is expected to raise interest rates several more times this year.

Before Russia’s invasion of Ukraine added a fresh wave of global economic uncertainty, some Fed officials had said the central bank would do better to hike interest rates by half a percentage point in March. Amid rising recession risks, Clifford Bennett, chief economist at ACY Securities, said he believes the Fed should act cautiously.

“Europe is likely to enter a recession and as the world experiences persistently high energy and food prices, the poor will be disproportionately affected. And raising interest rates will have no effect on this war-induced inflationary wave,” he said.

There isn’t much US economic data this week to give investors a better sense of how companies and investors are dealing with rising inflation. The Fed’s rate hike move had been anticipated as a supply chain for months.

Russia’s invasion of Ukraine has fueled fears that inflation could be worsening by pushing up energy and commodity prices. Oil prices are up more than 45% this year, and wheat and corn prices are also up. Boeing fell 3.6% after a 737-800 plane operated by China Eastern Airlines crashed in China with 132 people on board. According to reports on Tuesday, there were no survivors. China Eastern shares fell 7% on Tuesday.

In forex trading, the US dollar rose to a six-year high against the Japanese yen, hitting a level of 120 yen. It traded at 120.35 yen in the afternoon versus 119.47 yen. The euro cost $1.0991 compared to $1.1016.

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