HONG KONG: Stocks rebounded on Friday from the previous day’s rout, as investors led gains from Wall Street’s rally after Washington decided not to impose the toughest sanctions on Russia’s invasion of Ukraine.
The decision by Russian President Vladimir Putin to send troops to Ukraine sent shockwaves through Asian and European markets, with oil prices above $100 for the first time since 2014 as traders mulled a major conflict in Eastern Europe.
Speculation of an invasion has been growing for weeks, raising concerns about supplies of key commodities such as wheat, metals and crude oil.
Investors have also been concerned about the impact of any sanctions Western leaders will impose on Moscow.
Despite anger at Putin’s move, the punishments are not seen as being the harshest so far.
While Washington’s latest measures target two of Russia’s largest banks and see control over high-tech products aimed at weakening its defense and aerospace sectors, U.S. President Joe Biden has not cut off oil exports.
The news gave Wall Street a huge boost, with all three major indexes surging from deep in the red to close higher on Thursday, while crude oil prices fell back below $100.
The Nasdaq outperformed, closing more than 3 percent higher as commentators said the crisis could prevent the Federal Reserve from taking a series of aggressive rate hikes to curb inflation.
Tech companies are more vulnerable to rising borrowing costs and have been hit hard in recent months by bets on tighter monetary policy.
“Stocks don’t always move the way we expect,” Callie Cox of trading platform eToro said on Bloomberg’s “QuickTake Stock” broadcast.
“We sit here with these headlines and try to understand what they mean for the global economy, but first and foremost, fear is a contrarian indicator.
“While we’re all scared right now, some investors may think this is the time to re-engage.”
Gains in New York filtered through to Asia, with Tokyo, Shanghai, Seoul, Singapore and Wellington all gaining more than 1%. Hong Kong, Sydney, Taipei and Jakarta also rose.
Still, oil prices rose again, with Brent back above $100 a barrel, as traders remained sensitive to headlines and analysts warned that the conflict could keep prices high for months.
Cautiousness remained despite signs of progress in Iran’s nuclear talks, which could start exporting crude again globally and boosting supplies as demand soars as the world reopens.
While there is talk that the Ukraine crisis could lead the Fed to rethink its plans for tightening monetary policy, there were warnings bank boss Jerome Powell was not likely to be swayed by equity market losses.
“If investors are bidding up the Nasdaq 100 because they think Putin brought back the Powell Put, they may be sadly disappointed,” Max Gokhman, of AlphaTrAI, said referring to the idea the Fed would step in to support stocks from suffering hefty losses.
“The Fed isn’t going to stop tightening when the US labour market remains tight and growth is above-trend.”
Meanwhile, Federal Reserve Governor Christopher Waller said Thursday the US economy was healthy enough to withstand a rise in rates to one percent by summer with a 50 basis point move next month — double the usual amount in a single hike.
However, he admitted that the Ukraine crisis could force officials to rethink their plans.