Australian shares are set for a modest gain at the open as a global selloff took the Nasdaq into bear market territory amid concerns a surge in oil and gas prices could raise inflation while slowing growth.

ASX futures see-sawed between gains and losses this morning. They were up 10 points or 0.1% at 7004 as of 8.00am AEST, suggesting a positive start to trading.

US stocks tumbled on Monday amid record oil prices, taking the Dow into correction territory and the Nasdaq into a bear market, defined as a fall of more than 20% from the previous high.

The Dow Jones Industrial Average fell 2.4%. It is down about 11% from its January high. The S&P 500 dropped 2.95%, bringing its 2022 decline to almost 12%. The tech-heavy Nasdaq Composite lost 3.6% and is down 18% year-to-date and more than 20% from its high.

Oil prices whipsawed overnight as the US and its European allies mulled a ban on oil imports from Russia, one of the world’s largest producers. Prices breached US$130 during trading on Monday for the first time since 2008 before easing to US$123.71, a gain of 4.7%.

"The market's on increasingly shaky ground," said Hans Olsen, chief investment officer at Fiduciary Trust. "When you combine the price shocks that we're seeing in the energy complex on one hand and the galloping inflation that we're dealing with on the other hand, that's a really tough mix for an equity market to hold valuations where we are right now."

Locally, the S&P/ASX 200 closed 1.0% lower at 7038.6 on Monday as global oil prices surged amid investor fear over potential sanctions on the Russian oil sector.

Nearly all sectors finished in the red, with only energy and materials bucking the move, closing 5.3% and 1.0% higher, respectively.

Woodside Petroleum led the market, advancing 9.5%, while Ramelius Resources jumped 6.8% and Beach Energy climbed 6.3%.

Travel stocks declined as oil-price concerns mounted, with Qantas losing 7.9% and Flight Centre shedding 4.2%.

Australian property insurers were down between 2.7% and 6.0% as costs from continuing floods mounted.

Turning to commodities, gold futures rose 1.7% to $US2001.50; Iron ore jumped 6.8% to US$162.75 per tonne.

In bond markets, the US 10-Year Treasury Notes reversed yesterday’s decline and rose to 1.78%. At home, the yield on the Australian 10-year bond eased to 2.13%. Yields fall when prices rise.

The Australian dollar eased overnight and was buying 73.13 US cents as of 8.00am AEST, down from the previous close of 73.72. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, surged to 91.51, its highest level in almost two years.


Turning to Asian markets, Chinese stocks ended lower, as high oil prices weighed on equity markets in the region, Oanda said. "With most of Asia being massive net energy importers, it is hard to construct a bullish case," it said. Oil refiners and airlines declined as high crude prices placed pressure on costs. Rongsheng Petro Chemical lost 10% and Hengli Petrochemical fell 6.2%, while Air China, China Eastern Airlines and China Southern Airlines declined 9.9%, 9.9% and 9.8%, respectively. The Shanghai Composite Index shed 2.2%, the Shenzhen Composite Index slid 2.7% and the ChiNext Price Index was 4.3% lower.

In Hong Kong, the benchmark Hang Seng Index slid 3.9%, its lowest closing level since July 2016, as the surge in commodity prices driven by the Russia-Ukraine war spurs risk aversion. Equity markets are being weighed by the potential hit to corporate margins from higher commodity prices, SPI Asset Management says. The HSI's losses were broad-based, led by Meituan, sliding 11.3%; Haidilao International, slipping 10.8%; and Wuxi Biologics, dropping 9.2%. Meanwhile, PetroChina climbed 4.4% and CNOOC Ltd. rose 2.3% amid higher crude oil prices. The Hang Seng TECH Index closed 4.4% lower at 4527.83.

Japanese stocks closed lower, dragged by falls in tech and auto stocks, as concerns grew about the war in Ukraine and its impact on global trade. Lasertec fell 9.3% and Isuzu Motors dropped 9.1%. Meanwhile, energy company Idemitsu Kosan gained 6.8% and Sumitomo Metal Mining rose 4.3%. The Nikkei Stock Average fell 2.9%. Headlines on Ukraine would remain in focus after the US said it was in discussions with allies on banning Russian oil imports.


European stocks fell in closing trade on Monday as worries over the economic fallout from the Russia-Ukraine conflict persisted. The pan-European Stoxx Europe 600 fell 0.9%, having lost 7% the week before.

Banks and travel stocks lead the declines while energy shares rally on higher oil prices.
"Investors continue to fret about the war, oil prices, more sanctions, monetary tightening and a possible recession," IG analysts say. "This is a much bigger, and more solid, wall of worry than anything encountered since at least the pandemic, and is certainly composed of many more factors than we have seen over the last decade."

In London, the FTSE 100 fell 0.4% to 6959.48, after European markets fell sharply at the open on reports the US was considering a total ban on Russian oil, CMC Markets UK says.
The FTSE 100 hit an intraday low of 6,787 shortly after the markets opened but did recover in the afternoon session, with the best performers being in basic resources and oil and gas, it adds. Shell and BP both finished higher following the surge in crude oil prices to a 14-year high, and defence contractor BAE Systems also outperformed, CMC Markets UK says.

The Russian ruble seesawed and traded during the day at a record low of more than 150 rubles to $1. Russia's stock market is closed and will remain so until at least Tuesday, according to Russia's central bank. It hasn't traded normally since 25 Feb.

North America

The Dow Jones Industrial Average dropped about 800 points, putting the blue-chip gauge into correction territory, as surging oil prices deepened concerns about economic growth.

The selloff in equities also put the Nasdaq Composite Index in a bear market, defined as a 20% decline from a recent high. The moves during the start of 2022 had already sent the S&P 500 into correction territory, defined as a decline of at least 10% from a recent high. The Dow industrials joined the other indexes in correction territory Monday as the climb in oil prices threatened to feed into higher inflation.

Investors are growing fearful that the consequences for financial markets of the war in Ukraine, now in its 12th day, could reach further than initially thought. Already the conflict has roiled commodity markets, increased tensions between Moscow and the West and led to Russia being unplugged from much of the global financial system.

"The market's on increasingly shaky ground," said Hans Olsen, chief investment officer at Fiduciary Trust. "When you combine the price shocks that we're seeing in the energy complex on one hand and the galloping inflation that we're dealing with on the other hand, that's a really tough mix for an equity market to hold valuations where we are right now."

The Dow industrials fell 2.4%, or about 797 points, following four consecutive weeks of losses. They are down at about 11% from their January high.

The S&P 500 dropped 2.95%, bringing its 2022 decline to almost 12%. The tech-heavy Nasdaq Composite lost 3.6% and is down 18% year-to-date and more than 20% from its high. The S&P 500 entered a correction on 22 Feb, while the Nasdaq Composite fell into correction on Jan. 19.

Monday's losses were broad-based, with nine of the S&P 500's 11 sectors down in recent trading. The energy group added to its gains for the year while the utilities segment also advanced. The consumer discretionary segment led the decliners, recently dropping more than 4%.

Attention focused on energy markets, where oil prices rose after Secretary of State Antony Blinken said Sunday that the US and European partners are discussing a ban on imports of Russian oil.

Global benchmark Brent crude topped $130, the highest level since July 2008, before easing from its highs. Brent advanced 4.3% Monday to $123.21 a barrel, its highest settle value since April 2012.

Equity investors are worried that sky-high oil prices will fuel inflation and that the war in Ukraine and ensuing sanctions on Russia could hurt businesses based in the US

"The rise in oil is destabilizing the market," said Jay Hatfield, chief executive and portfolio manager at Infrastructure Capital Advisors. "The market is concerned about the war and its impact on US growth and US companies."

Investors appear to be in classic flight-to-safety mode and stocks are suffering as a result, said Kelvin Tay, the Singapore-based regional chief investment officer for UBS. Very high oil prices will function as "a tax on the global economy, and therefore global growth will actually have to slow," he said.

The top-performing stocks in the S&P 500 were energy companies that stand to benefit from rising oil prices. Shares of Schlumberger NV jumped 8.8%, while Halliburton shares advanced 6.7%.

Among the worst performers, by contrast, were a number of travel-related companies that could be hurt by higher fuel prices and the possibility that consumers could cut back on travel because of geopolitical tensions. United Airlines shares dropped 15%, and Delta Air Lines shares fell 13%.

Occidental Petroleum shares fell 0.6% after activist investor Carl Icahn exited his position after years of campaigns. Bed Bath & Beyond rose 23% after billionaire investor Ryan Cohen disclosed a 9.8% stake in the retailer.

Higher commodity prices and the resulting accelerated inflation are complicating the next moves of major central banks, which were largely set to begin tightening monetary policy before the war began.

The European Central Bank is meeting this week, and investors will be watching for changes to its growth outlook and policy. In the US, Federal Reserve Chairman Jerome Powell said last week that he would propose raising interest rates by one-quarter of a percentage point at the central bank's meeting later this month.

"This toxic cocktail poses a huge problem for central banks. Do they tighten monetary policy and risk pushing the world into a recession even quicker or do they allow inflation to rip higher, which would do the same thing?" said Michael Hewson, chief markets analyst at CMC Markets. Inflation concerns are weighing on the bond market, he added.

The yield on the benchmark 10-year US Treasury note rose to 1.748% Monday from 1.722% Friday, reversing direction after posting the biggest one-week decline since March 2020 last week. Yields rise when prices fall. Bonds typically perform well in times of market stress or slower economic growth, but their fixed cash flows lose value in periods of rapidly rising prices.

Other safe-haven assets rallied. Gold rose 1.5% to $1993.90 per troy ounce, its highest settle value since August 2020. The greenback strengthened, with the WSJ Dollar Index rising 0.6%. The US dollar is seen as a haven asset because of its status as the world's reserve currency.