SYDNEY: Oil prices accelerated higher on Thursday as the war in Ukraine sparked a frantic sprint for resources, an ominous sign for global inflation, while Asian shares eked out gains after reassuring comments from the Federal Reserve helped Wall Street bounce back.
Brent crude topped $117 per barrel and is now up almost 20% on the week, while everything from coal to natural gas and aluminium are on fire as Western nations tighten sanctions on Russia.
“Russia supplies around 30% of Europe’s gas and oil imports and accounts for around 11% of world oil production,” said Shane Oliver, head of investment strategy at fund manager AMP. “In short, investors are worried about a stagflationary shock.”
Resource-rich Australian shares .AXJO rose 0.9 percent on the commodity rush, while Indonesian shares .JKSE were just off record highs.
Japan’s Nikkei .N225 rose 0.8 percent, while MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged up 0.6 percent.
MSCI’s decision to remove the country from its emerging markets index has exacerbated Russia’s financial isolation, while FTSE Russell said Russia would be removed from all its indices.
Moody’s was quick to follow after Fitch downgraded Russia’s sovereign credit rating by six notches to “junk”, saying it was uncertain whether the country would be able to repay its debt.
After bouncing overnight, S&P 500 stock futures ESc1 were flat, while Nasdaq futures NQc1 eased 0.1%.
EUROSTOXX 50 futures STXEc1 slipped 0.2%, and analysts at JPMorgan had a stark warning for clients.
“We believe investors should underweight the Euro area in both the currency and the equity space given its vulnerability to any further escalation,” they wrote in a note.
“We revised our commodity price forecasts 10-20% higher across the board given the unfolding geopolitical crisis,” they added. “One silver lining is that the crisis forced a dovish reassessment of the Fed by the market, and we continue to assume a ‘moderate’ hiking path.”