Stocks fall, oil rebounds as peace talks stall

FILE PHOTO – Screens displaying stock index prices and the exchange rate of the Japanese yen against the US dollar are seen after the New Year celebration marking the opening of trading in 2022 at the Tokyo Stock Exchange (TSE), amid the coronavirus disease (COVID-19) pandemic, in Tokyo, Japan, January 4, 2022. REUTERS/Issa Kato

SINGAPORE (Reuters) – Stock markets took a breather on Friday after several days of big gains, as geopolitical tensions stemming from the conflict in Ukraine kept investors on edge over the weekend.

After a fourth consecutive day of talks between Russian and Ukrainian negotiators without tangible progress, earlier hopes for a peace deal are fading and oil prices are starting to rise again. Read more

Adding to the mix, US President Joe Biden is expected to issue a warning that Beijing will pay a price if it backs the Russian war effort when he speaks to Chinese President Xi Jinping on a call scheduled for 1300 GMT. Read more

MSCI’s broadest index of Asia Pacific shares outside Japan (.MIAPJ0000PUS.) It was flat and the Hang Seng Index in Hong Kong settled after a furious two-day increase. Japan’s Nikkei Index (.N225) It rose 0.6%. S&P 500 futures slipped 0.4% while Euro STOXX 50 and FTSE futures held steady.

Oil, which collapsed about 30% from last week’s peak, rebounded strongly as traders fear that hope for peace in Ukraine is misplaced. Brent crude futures were up 2% last trading at $108.64, up more than $10 a barrel in two sessions.

“It is very difficult to have any confidence that you will be able to get reliable commodities from Russia or Ukraine,” said Tobin Gorey, a commodity strategist at Commonwealth Bank of Australia in Sydney. “You’ll look elsewhere and that tends to drive prices higher.”

Wheat and corn futures contracts, sensitive to supply disruptions in the Black Sea, saw a sharp rebound.

Australian ASX 200 Heavy Mining Index (.AXJO) It recorded its best week since February last year and the commodity-sensitive Australian dollar hit a two-week high of $0.7398.

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The problems faced by policymakers whose economies are suffering from high inflation and sluggish growth were also emphasized during a series of central bank meetings this week.

The US Federal Reserve raised interest rates for the first time in more than three years on Wednesday, surprising traders with a tougher-than-expected outlook. The Bank of England also rose, but was surprised by its pessimistic forecast which sent gold prices higher. Read more

The Bank of Japan did not provide any surprises on Friday, leaving policy too easy, which kept heavy pressure on the yen. Read more

The Japanese currency hit a six-year low of 119.13 this week and was last traded at 118.78 per dollar. “The next multi-session target could be the psychological level of 120.00,” said Terence Wu, a strategist at OCBC Bank in Singapore.

The euro hovered at 1.1086 dollars.

Hang Seng in Hong Kong (.HSI) It followed its worst session in more than six years with the biggest two-day rally since 1998 this week and kept interest rate cut hopes on display on Friday.

Treasuries have stabilized, but a flat yield curve that tends to invert reverses concerns about long-term growth. The benchmark 10-year Treasury yield was last at 2.1780%.

Spot gold hovered at $1,932 and Bitcoin was clinging to over $40,000.

(Reporting by Tom Westbrook Editing) By Shri Navaratnam and Simon Cameron Moore

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