Australia

Australian shares are poised to fall after stocks and bond yields tumbled on Wall Street as investors retreated to safe assets amid concerns about how surging oil prices could flow through to global inflation, growth and central bank rate hike calculus.

ASX futures were down 51 points or 0.7% at 6995 as of 8.00 am AEST on Wednesday, suggesting a negative start to trading.

The S&P 500 fell 1.6% overnight. The blue-chip Dow Jones Industrial Average lost 1.8%, while the technology-heavy Nasdaq Composite was down 1.6%.

"Over the longer term, the scenario where we were hoping this would be a brief incursion is now a much lower-probability outcome. That means supply chain issues and inflationary pressure for a longer period of time," said Andy McCormick, chief investment officer at T. Rowe Price. 

Yields on US 10-year Treasury Notes, considered one of the safest assets in the world, declined for a second day to 1.72%, down from 1.96% on Friday. Yields fall as prices rise.

Oil prices rallied, rising back above $100 a barrel to their highest level since 2014. Brent crude, the international oil benchmark, climbed over 8% to $106.26 a barrel.

Locally, the S&P/ASX 200 closed 0.7% higher at 7096.5 on Tuesday, as the Reserve Bank held the cash rate at a record low of 0.1% despite inflationary pressures.

Governor Philip Lowe called the Ukraine crisis a “major new source of uncertainty” in comments on Tuesday and reiterated the bank would be patient when it came to raising rates.

The beaten-down tech sector led the way, jumping 5.7%, as Block's ASX-listed securities surged another 13% for a 51% gain across three sessions since the payments giant announced its quarterly results. The sector is still down 20% in 2022.

Woodside, Ampol, Viva and Beach added 0.5%-1.2%, as energy stocks benefited from higher oil prices, while the heavyweight financial sector snapped a three-session losing streak with gains of between 0.65% and 1.5% by ANZ, Westpac, Commonwealth and NAB.

In Asia, stock markets were mixed on Tuesday. Japan's Nikkei 225 rose 1.2%, while Hong Kong's Hang Seng Index edged up 0.2%. In Europe, the pan-continental Stoxx Europe 600 fell 2.4%.

In commodities, gold futures jumped 2.5% to $US1949.00; Iron ore added 3.9% to US$144.45.

Turning to local bond markets, the yield on the Australian 10-year bond rose to 2.18%.

The Australian dollar was buying 72.42 US cents as of 8.00am AEST, down from the previous close of 72.60. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, rose to 90.41.

Asia

Turning to Asian markets, Chinese shares ended higher, tracking broad gains among other Asian equities markets. Investors are keeping a close eye on the war in Ukraine, while economic data out of China eased concerns of a slowdown in the world's second-largest economy. Oanda noted that China's official manufacturing and non-manufacturing February PMIs outperformed expectations. "That alleviated fears of a China slowdown and has displaced property sector nerves off the front page for now," Oanda says. The Caixin manufacturing PMI reading for February also improved, swinging to expansion territory from contraction in January. Bank stocks were among the gainers, with Agricultural Bank of China rising 0.7% and Bank of China adding 0.6%. The Shanghai Composite Index closed 0.8% higher.

In Hong Kong, stocks finished higher, with the benchmark Hang Seng Index closing up 0.2%. The advent of China's annual National People's Congress, set to start this weekend, is having a stabilizing effect on Chinese stocks, which should in turn support Hong Kong-listed shares of Chinese companies, KGI Securities says. However, the Ukraine conflict is likely to cause stock-market volatility to continue, KGI says. It puts support for the HSI at 22400. Gains were broad-based, with Xinyi Glass, Wuxi Biologics and AAC Technologies advancing 5.1%, 4.8% and 4.2%, respectively.

Japanese stocks closed higher, led by gains in shipping and defence stocks amid geopolitical uncertainty over the war in Ukraine. Major shipper Mitsui O.S.K. Lines advanced 6.2% and Mitsubishi Heavy Industries gained 5.1%. The Nikkei Stock Average rose 1.2. Investors are focusing on headlines on Ukraine.

Europe

European markets dropped as continuing jitters about the Ukraine-Russia conflict left most stocks in the red. The pan-European Stoxx 600 lost 2.4%.

"Trading screens across global markets have turned red again, as market sentiment shifts back towards risk aversion due to the worsening situation in Ukraine," IG analyst Chris Beauchamp says.

"Defence spending is expected to increase substantially in this new fraught world, which has propelled BAE Systems higher once again, while the ongoing rise in commodity prices has put miners on the front foot."

In London, the FTSE 100 declined 1.7% on Tuesday as the situation in Ukraine worsened and the price of oil rose despite speculation around the US plans to release strategic reserves.

The London Stock Exchange suspended trading in shares of Russia's VTB Bank after the exchange said Bank of New York Mellon had resigned as the depositary for the company.

The biggest faller in the session was steel and mining company Evraz PLC, which operates mainly in Russia, and closed the day down 29% at 102.85 pence, followed closely by Russian mining company Polymetal International, which was down 26% at 258.90 pence. On the up side, BAE Systems was the biggest riser of the day, closing up 3.7% at 746.20 pence, buoyed by expectations of an increase in defence spending stemming from the war in Ukraine.

Russian markets have been dealt a heavy blow by the invasion and the ensuing sanctions, with investors jettisoning Russian stocks. A sharp, sudden interest-rate rise from the nation's central bank helped send the ruble tumbling. Tradeweb Markets Inc., a top bond-trading platform, removed Russian securities Tuesday, citing Western sanctions.

On Tuesday, the Russian ruble retreated 6.3% against the dollar, after falling almost 30% Monday. Market-data services have shown limited price updates this week, suggesting few transactions are taking place. The Russian stock market remained closed after plummeting last week.

North America

US stock indexes fell and bond yields slipped Tuesday while oil prices rose to multiyear highs as Russia's invasion of Ukraine continued to whipsaw through markets.

Stock markets have been battered in 2022, with the S&P 500 and Nasdaq both posting their worst two-month stretches since March 2020 to start the year. The war in Ukraine has further soured investors' sentiment. Though only 1% of S&P 500 companies' revenue stems from Russia and Ukraine, according to FactSet, investors are still worried about ripple effects on the global economy. The geopolitical crisis came as economies were already facing the highest inflation in decades, heaping pressure on central banks to raise interest rates.

"Now we have this shock, and this shock feeds into the biggest risk—sustained high inflation," said Jon Maier, chief investment officer at Global X ETFs.

The S&P 500 fell 1.6%. The blue-chip Dow Jones Industrial Average lost 1.8%, while the technology-heavy Nasdaq Composite was down 1.6%.

Oil prices rallied, rising back above $100 a barrel to their highest level since 2014. Brent crude, the international oil benchmark, climbed over 8% to $106.26 a barrel. Benchmark European natural-gas prices jumped over 24%. Members of the International Energy Agency agreed Tuesday to release supplies from oil reserves in an effort to keep a lid on rising crude prices.

Energy companies' stocks gained alongside oil prices, with Occidental Petroleum rising 5.7% and Chevron adding 3.3%. Refiners balked at buying Russian oil, while banks are refusing to finance shipments of Russian commodities, according to oil executives, bankers and traders. Russia is the single biggest gas exporter and a major supplier of crude oil.

Safe-harbor assets were in demand, lifting gold prices and driving down government bond yields. Gold prices rose 1.9%. The yield on the benchmark 10-year US Treasury note fell to 1.708% Tuesday from 1.836% Monday, with investors betting that the Federal Reserve won't act as aggressively to curb inflation. The yield on German government bonds fell into negative territory for the first time since January. Yields fall as bond prices rise.

A steep fall in government bond yields also dragged down bank stocks. The KBW Nasdaq Bank Index of large US commercial lenders lost more than 6%.

Stock indexes around the world have been volatile in recent days as investors attempt to gauge the potential global economic impact from the invasion and resulting sanctions. Constricted supplies of Russian commodities could add to already elevated inflation, but investors hope the overall effect on the world's biggest economies will be muted.

"We're in a situation that I don't believe there is an actual playbook for," said Eric Merlis, managing director of corporate risk solutions at Citizens.

Bitcoin recently traded above $43,602, up some 4.7% from its 5 pm New York level on Monday, according to CoinDesk. The invasion of Ukraine has driven demand for cryptocurrencies, helping lift Bitcoin and other coins.
In corporate news, Target's shares jumped nearly 10% after it reported strong sales during the holiday period. Albertsons rose 7.8% after the supermarket chain said it had begun a strategic review. Workday gained 4.9% after reporting earnings late Monday that beat estimates.

"The question from here: Is the economy able to continue to push forwards through these segments and avoid contractions?" said Matt Stucky, senior portfolio manager at Northwestern Mutual Wealth Management Company.

Elsewhere in commodities, wheat prices were at their highest levels since 2008.

Cease-fire talks have failed to produce concrete results so far. Russia and Ukraine have agreed to further talks, and investors have welcomed the fact that they have taken place. Still, Moscow is pouring manpower and equipment into the country and Russian forces have adopted a strategy of pummeling civilian areas, a bid to demoralize resistance.

"I am not sure what we will see from negotiations, but on the ground there will be no let up because [Russian President Vladimir] Putin has to come away from this war with something to show for it," said Hani Redha, a portfolio manager at PineBridge Investments.