Shares, oil volatile ahead of NATO Russia-Ukraine summit
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[March 24, 2022] By
Marc Jones
LONDON (Reuters) - World share markets were
choppy on Thursday as the Russia-Ukraine war kept oil above $120 a
barrel, while "stagflation" worries rose on renewed talk of aggressive
U.S. interest rates hikes and slowing growth.
Europe's main stock indexes barely budged and government bond yields
edged up toward multi-year highs hit earlier in the week as March PMI
data came in reassuringly robust.
Focus was otherwise on a Thursday special NATO summit in Brussels, which
U.S. President Joe Biden will attend, to discuss further responses to
Russia's month-old invasion of Ukraine, which Moscow calls a "special
military operation".
Rabobank's head of macro strategy, Elwin de Groot, said markets would be
watching what emerges closely, especially how unified NATO members
remain and what Biden can offer European countries to help wean
themselves off Russian gas.
"The NATO meeting is certainly important," de Groot said. "At the
minimum you would expect the members to come up with preparations for a
possible further escalation in the Ukraine war."
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Wall Street futures were up a solid 0.6% ahead of trading there, but the
mood seemed changeable.
MSCI's broadest index of Asia-Pacific shares outside Japan recouped some
of its early losses overnight but ended down 0.6% after more falls in
China and Hong Kong. [.SS]
Japan's Nikkei bucked the trend, rising 0.25% to a nine-week high as its
exporters cheered the yen falling to its lowest against the dollar since
2015. [L2N2VR0D6]
At 1000 GMT, the dollar was up 0.4% versus the yen, at 121.65, with
expectations that the Bank of Japan will be far behind other top central
banks in raising interest rates.
HAWKISH
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A model of 3D printed oil barrels is seen in front of displayed
stock graph going down in this illustration taken, December 1, 2021.
REUTERS/Dado Ruvic/Illustration
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Driving some of the volatility, Federal Reserve policymakers on
Wednesday signalled they stood ready to take more aggressive action to
bring down decades-high inflation, including a possible
half-percentage-point rate hike at the next policy meeting in May.
Those signals pushed all three main U.S. share benchmarks 1% lower overnight.
[.N]
"The sharp hawkish repricing of Fed rate hike expectations has mainly benefited
the U.S. dollar against low yielding currencies whose own domestic central banks
are expected to lag well behind the Fed in tightening policy," MUFG currency
analyst Lee Hardman wrote in a note to clients.
Oil and gas markets also remained hot amid the geopolitical uncertainty.
Russian President Vladimir Putin said on Wednesday that Moscow would seek
payment in roubles for gas sold to "unfriendly" countries, jolting energy
markets, although Italy's President Mario Draghi said it planned to keep paying
in euros.
Brent futures were little changed at $121.67 a barrel and U.S. West Texas
Intermediate futures fell 41 cents, or 0.35%, to $114.5 a barrel
The bond market was starting to shift again with the yield on benchmark 10-year
Treasury notes up at 2.37% and German bunds creeping over 0.52%.
"Inflation is really the big driver," Rabobank's de Groot said, adding that it
was also behind falling consumer confidence.
EU leaders are expected to agree at a two-day summit starting on Thursday to
jointly buy gas, as they seek to cut reliance on Russian fuels and build a
buffer against supply shocks. But the bloc remains unlikely to sanction Russian
oil and gas.
Gold was slightly lower at $1,942.9 per ounce. [GOL/]
(Reporting by Marc Jones; Editing by William Mallard)
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