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European stocks fell 1.7%, with indexes in Germany and Britain
losing 1.9% and 0.9% respectively, a reversal after futures
gauges had suggested slim gains in early trade. Automakers
suffered the most, falling 0.9%.
Foreign ministers from Russia and Ukraine will meet in Turkey on
Thursday in the first high-level talks between the two countries
since Moscow invaded its neighbour, with Ankara hoping they
could mark a turning point in the conflict.
The prospect of talks had buoyed MSCI's broadest index of
Asia-Pacific shares outside Japan by 1.8%, with Tokyo adding
3.9%, its best day since June 2020.
Analysts said the gains in Asia, which came after European
stocks had their best day in almost two years on Wednesday, were
always susceptible to a sharp reversal.
"The prospect of peace, an imminent de-escalation, really is pie
in the sky," said Michael Hewson, chief markets analyst at CMC
Markets.
"As with any sort of bear market you always get face-ripping
rallies in them, because people are reluctant to be aggressively
pessimistic."
Still, the euro also held on to most of its gains from its
steepest daily jump in almost six years ahead of a European
Central Bank meeting likely to shed light on the bloc's monetary
and fiscal response to Russia's invasion.
The single currency was last down 0.3% at $1.1046.
Other EU talks were due, with leaders set to hold initial
discussions at a summit starting on Thursday evening about a
joint investment plan to boost the bloc's independence in
defence and energy.
U.S. inflation figures are also due, which could further guide
expectations for the Federal Reserve's meeting next week.
Wall Street futures were down around 0.5%, after the S&P 500
posted its biggest one-day percentage gain since June 2020 on
Wednesday.
"U.S. equities could be in a holding pattern with higher levels
of volatility as investors assess the impact of the Ukraine
conflict on inflation and possible Fed actions," said David
Chao, Hong Kong-based global market strategist at Invesco.
MSCI world equity index, which tracks shares in 50 countries,
was up 0.2%.
OIL STEADIES
Oil steadied after falling over 12% in the previous session as
investors weighed whether major producers would boost supply to
help plug the gap in output from Russia sparked by sanctions.
Brent crude futures added over 3% on Thursday to $114.64 a
barrel, and U.S. crude rose 1.73% to $110.58.
The Kremlin accused the United States on Wednesday of declaring
an economic war on Russia that was sowing mayhem through energy
markets, and put Washington on notice it was considering its
response to a ban on Russian oil and energy.
European Union leaders will also phase out buying Russian oil,
gas and coal, a draft declaration showed on Thursday, as the
bloc seeks to reduce its reliance on Russian sources of energy,
following a ban from the United States.
Higher energy prices fed into expectations the U.S. Federal
Reserve will raise interest rates by 25 basis points at its
policy meeting next week.
Data due later in the day is expected to show U.S. consumer
inflation racing at a 7.9% annualised clip in February.
The dollar index was up 0.2% at 98.234, after tumbling 1.2%
overnight amid the euro and equities' surge.
(Reporting by Tom Wilson in London, Stella Qiu in Beijing and
Alun John in Hong Kong; Editing by Sam Holmes, Raju
Gopalakrishnan and Raissa Kasolowsky)
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