HONG KONG: Asian markets rebounded on Wednesday and oil prices fell sharply on hopes that Russia would not invade Ukraine after Moscow said some of its troops on the border between the two countries had begun to withdraw.
While unsubstantiated, the Russian claims have provided some much-needed relief for investors, who have grown increasingly concerned about conflict in Eastern Europe after Western powers warned for days of an imminent attack.
The news also helped traders shrug off another larger-than-expected surge in U.S. producer prices, which some warned could signal another painful jump in consumer inflation in the future.
Stocks were in a spiral after a top U.S. security adviser said on Friday that Russian President Vladimir Putin could send troops to Ukraine at any time, adding to a slew of safe-haven issues plaguing markets, including soaring prices, central bank fiscal support The end and the coronavirus pandemic.
But that sentiment picked up on Tuesday after the Russian Defense Ministry said some of the more than 100,000 soldiers who had assembled near Ukraine in recent weeks had begun returning to their barracks.
Then, after three hours of talks, Putin held a news conference with German Chancellor Olaf Scholz, in which the Russian leader confirmed a “partial withdrawal” and said he was willing to seek a diplomatic solution to the crisis, adding that “of course “He doesn’t want war.
“We are ready to cooperate further. We are ready to go on a negotiating track,” Putin said. “We hope that this issue will be resolved through negotiation, peaceful means now, now or in the near future.”
He said he hoped Western leaders would listen to his concerns about NATO’s expansion into Russia’s borders and possible membership in Ukraine.
Still, while Joe Biden said the U.S. was “diplomatically ready,” he warned Putin’s soldiers “are still in a very dangerous situation.”
While politicians remained wary, investors were excited by the positive developments.
All three Wall Street indexes rose after three days of sharp losses, also weighed down by inflation concerns.
Asia is built on gains from earlier exchanges.
Tokyo rose more than 2%, while Hong Kong, Seoul, Wellington, Taipei and Manila all rose more than 1%. Shanghai, Sydney and Jakarta also rose, but Singapore edged lower.
Crude oil steadied, falling more than 3 percent on Tuesday, as easing tensions between Russia and Ukraine eased supply concerns amid soaring demand, fueling inflationary pressures.
Both major contracts held at more than seven-year highs, with observers warning they could break $100 soon.
“Volatility and uncertainty are only going to increase. It could be due to Russia-Ukraine, it could be due to stubborn inflation,” UBS’s Brenda O’Connor-Honas told Bloomberg Television.
“There’s still a lot of uncertainty for customers and investors.”
News from Europe overshadowed data showing U.S. producer prices rose twice as expected in January, adding to fears that the Federal Reserve will begin to aggressively tighten monetary policy.
“Factory inflation remains very high, fueling inflation expectations for a while and supporting the Fed’s case for kicking off the rate hike cycle with a 0.5 percentage point hike,” said OANDA’s Edward Moya.
“Americans expect inflation to eventually ease next year, but they are increasingly concerned that the peak may be much worse than they initially expected. President Biden is expected to acknowledge the recent spike in food and gasoline prices, which means an executive order may be on the way.
Investors are now awaiting the release of minutes from the Fed’s January policy meeting, hoping it will provide clues on the pace and timing of any rate hikes.