Australia

Australian shares are poised to fall after global markets ended in a sea of red amid the ongoing war scare in Ukraine and hawkish statements from a top US Federal Reserve official.

ASX futures were down 64 points or 0.9% at 7083 near 8.00 am AEST, suggesting a negative start to trading.

US stocks fell on Monday as investors assessed the possibility of war between Russia and Ukraine and the prospect of interest-rate increases by the Federal Reserve.

The Dow Jones Industrial Average was down 0.5%. The S&P 500 declined 0.4%, while the technology-heavy Nasdaq Composite was about flat, down less than 1 point.

Locally, the S&P/ASX 200 closed 0.4% higher at 7243.9 after a volatile session. The benchmark dropped at the open, following US stocks lower over continued concern over Russia and Ukraine. It rallied into positive territory and then twice dropped back to the gainline before edging higher into the close.

Energy stocks jumped as oil prices neared eight-year highs, with Woodside, Santos and Beach adding between 3.6% and 9.4%.

Bank stocks resumed their recent rally as ANZ, Commonwealth, NAB and Westpac added between 1.4% and 4.8%.

Shares of gold miners rose amid the geopolitical uncertainty, but weakness in iron-ore and lithium stocks pulled the materials sector lower.

Elsewhere overseas, European markets were hard hit early in the session by the threat of a possible ground war in Ukraine. The pan-continental Stoxx Europe 600 closed down 1.8%, its third straight day of losses. The index pared losses after Russian Foreign Minister Sergei Lavrov, speaking in a meeting with Russian President Vladimir Putin, suggested Moscow should continue talks with the US and its allies. In Asia, Japan's Nikkei 225 fell 2.2% and China's Shanghai Composite Index fell 1%.

Turning to commodities, gold futures added 1.76% to $US1874.50 an ounce; Brent crude gained 1.6% to $US95.99 a barrel; Iron ore fell 1.3% to US$149.

In bond markets, the yield on the Australian 10-year bond eased to 2.13%. The benchmark US 10-year Treasury yield rose to 1.99%. Yields fall when prices rise.

The Australian dollar was buying 71.20 US cents near 8.00am AEST, down from the previous close of 71.33. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, rose to 90.06.

Asia

Turning to Asian markets, Chinese shares closed lower, tracking broad declines among other Asian equities, on concerns over tensions between Ukraine and Russia. The Shanghai Composite Index fell 1.0%, the Shenzhen Composite Index was 0.4% lower and the ChiNext Price Index closed 0.5% lower. Construction stocks were among the worst performers amid concerns over weak sentiment in China's property market. Greenland Holdings skidded 2.8%, Shanghai Construction Group slid 1.7% and Seazen Holdings fell 6.7%. Among bank stocks, Agricultural Bank of China slipped 1.3% and Bank of Shanghai declined 1.4%.

In Hong Kong, the Hang Seng Index closed 1.4% lower, as strict lockdowns triggered by the city's worsening Covid-19 outbreak weighed on sentiment, IG says. Market participants also likely held back from taking additional risks amid uncertainty surrounding Russia-Ukraine tensions, IG adds. Real estate stocks fell, led by Country Garden Services Holdings, which closed 6.7% lower and China Resources Land, which was off 5.9%. Among other stocks, manufacturer Xinyi Glass Holdings fell 5.1%, while internet company NetEase declined 4.2%. Oil major PetroChina led gains led with its 2.7% advance.

Japan's Nikkei Stock Average fell 2.2% amid escalating Russia-Ukraine tensions. Market participants are digesting the potential implications of these tensions as well as a more hawkish Fed rate-increase trajectory, OCBC Treasury Research says. Sysmex slid 15%, Bridgestone dropped 8.9% and M3 lost 7.1%. Meanwhile, oil explorer Inpex climbed 6.6% and oil refiner Idemitsu Kosan rose 3.3% amid higher oil prices.

Europe

European stocks ended sharply lower as concerns about political volatility in Russia and Ukraine spooked investors. The pan-European Stoxx 600 fell 1.8%.

"Stock markets have suffered steep losses this afternoon, hit hard by the growing tensions in eastern Europe, and will remain under pressure for the time being," IG analyst Chris Beauchamp says. "Friday's slump has carried over into the new week, and it looks like the weakness in stocks is with us for a while yet”.

In London, the FTSE 100 dropped 1.7% along with global stock markets on worries of war in Ukraine.

"Uncertainty is terrible for investors, and it will take real nerve to stay invested through war, particularly as news headlines are likely to cause panic on the markets," AJ Bell said.
Big losers on Monday included British Airways owner IAG, which fell 5.6%, and the major banks, with Barclays down 5.1%, Lloyds falling 4.2% and NatWest dropping 4.1%. HSBC and Standard Chartered closed 1.6% and 1.4% lower respectively.

North America

US stocks fell on Monday as investors assessed the possibility of war between Russia and Ukraine and the prospect of interest-rate increases by the Federal Reserve.

The Dow Jones Industrial Average was down 0.5%. The S&P 500 declined 0.4%, while the technology-heavy Nasdaq Composite was about flat, down less than 1 point.

European markets were hard hit early in the session by the threat of a possible ground war in Ukraine. The pan-continental Stoxx Europe 600 closed down 1.8%, its third straight day of losses. The index pared losses after Russian Foreign Minister Sergei Lavrov, speaking in a meeting with Russian President Vladimir Putin, suggested Moscow should continue talks with the US and its allies.

Yields on government bonds were whipsawed by the fast-moving situation. After initially falling as investors reached for the safety of US Treasurys, they bounced back on Mr. Lavrov's comments and climbed further on comments from hawkish Fed officials about the pace of interest-rate increases.

The yield on the 10-year Treasury notes was recently 1.993%, up from 1.951% Friday. Bond yields and prices move in opposite directions.

After weeks in which the brewing conflict appeared to have little impact on Wall Street, US stocks tumbled Friday after the White House warned that Russia could invade Ukraine at any moment. Moscow has denied intending to invade Ukraine, but Russia's military buildup has quickened, with forces positioned on three sides of the country. The US is closing its embassy in the Ukrainian capital of Kyiv and relocating operations to the city of Lviv, near the Polish border, according to the State Department.

"The market has woken up to the risk there over the past week or so," said Jon Adams, a portfolio manager at BMO Global Asset Management. "The challenge is that it's very hard to assess the risks of a war between Russia and Ukraine, because it's such an unpredictable situation."

Stocks have also been buffeted this year by the prospect of the Fed raising rates. The central bank is gearing up to increase borrowing costs to combat the highest rate of inflation in four decades, winding down the easy-money policies that have pushed riskier assets higher for much of the past two years.

St. Louis Fed President James Bullard told CNBC on Monday that the Fed should "front-load" its planned rate increases, warning that the central bank's credibility was on the line. Another top Fed official, Kansas City Fed President Esther George, said the central bank should consider selling bonds from its $9 trillion asset portfolio to address high inflation.

Oil prices climbed further on concerns that a war would curtail supplies of Russian crude amid a lack significant spare supplies. Front-month Brent oil futures advanced 2.2% to $96.48 a barrel, the highest settle for the global crude benchmark since 2014.

Prices for natural gas, of which Russia is the single biggest exporter globally, rose on both sides of the Atlantic. In the US, benchmark gas prices jumped 6.4% to $4.195 per million British thermal units. Prices in Europe, which depends on Russia for much of its gas—a chunk of it flowing through Ukraine—climbed 4.3%.

Prices for palladium—a metal widely used in the auto industry and heavily produced in Russia—gained nearly 7%.

Investors say the standoff over Ukraine is difficult to trade. If Moscow were to attack and the US and its allies responded with sanctions, the hostilities could affect the world economy and markets in unpredictable ways.

One likely consequence, given Russia's position as a commodities superpower, would be higher energy prices, which could keep up the pressure on central banks to raise rates. At least in the short term, stocks and bond yields would likely decline as investors sought safe assets, investors and analysts say.

"We have the inflation story and then we have the Russian story," said Lars Skovgaard Andersen, senior investment strategist at Danske Bank Wealth Management. In the event of an invasion, "there will be some negative effect on markets, but I also think investors are incorporating this," he added.

Among individual US stocks, Splunk rallied 9.9% after the Journal reported that Cisco Systems had made a takeover offer worth more than $20 billion for the software maker.

Vaccine-maker stocks fell as data showed the Omicron wave of Covid-19 receding and after US health regulators said Friday they would delay a decision on authorizing the first vaccine for children under 5 years. Shares of Moderna tumbled 13% on Monday, making it the worst-performing stock in the S&P 500. Pfizer shares declined 2.8%, while US-listed shares of its partner BioNTech SE sank 9%.

Shares of airlines were hammered in Europe after reports that several were avoiding Ukraine's airspace. Budget carrier Wizz Air dropped 6.3%, while British Airways owner International Consolidated Airlines Group lost 5.6%.