Asia’s major markets rebounded on Wednesday as hopes rose that Russia won’t invade Ukraine now, after Moscow said some of its troops on the countries’ border had started pulling back.
The Russian claims provided some much-needed relief for investors, who had grown increasingly fearful of a conflict in Eastern Europe after Western powers warned for days that an attack was imminent.
The news also helped traders brush off another forecast-busting surge in the US producer price index that some warned could indicate another painful jump in consumer inflation down the line.
Equities were sent into a spiral after a top US security adviser said on Friday that Russian President Vladimir Putin could send troops into Ukraine any day, adding to a range of risk-off issues plaguing the markets including soaring prices, the end of central bank financial support and the coronavirus pandemic.
But the mood lifted on Tuesday after Russia’s defence ministry said some of the more than 100,000 soldiers massed on the Ukraine border in recent weeks had started to return to their barracks.
Then, after three hours of talks, Putin and German Chancellor Olaf Scholz held a news conference in which the Russian leader confirmed a “partial pullback of troops” and said he was willing to look for diplomatic solutions to the crisis, adding that “of course” he did not want war.
While politicians remained wary, investors jumped on the positive developments. All three Wall Street indexes jumped after three days of hefty losses, which were also fanned by inflation worries.
And Asia built on the gains. Tokyo, Seoul and Manila piled on around 2%, while Hong Kong, Sydney, Wellington and Taipei jumped more than 1% each. Shanghai, Singapore and Jakarta were also up.
The benchmark Nikkei 225 index ended up 2.22% or 595.21 points at 27,460.40, while the broader Topix index gained 1.67% or 31.93 points to 1,946.63.
The Hang Seng Index rose 1.31%, or 319.92 points, to 24,675.63. The Shanghai Composite Index added 0.57%, or 19.74 points, to 3,465.83, while the Shenzhen Composite Index on China’s second exchange gained 0.59%, or 13.36 points, to 2,296.99.
London, Paris and Frankfurt also rose opening exchanges.
Crude Prices Rebound
Crude rebounded after tanking more than 3% on Tuesday as the easing of Russia-Ukraine tensions tempered fears about supplies at a time when demand is soaring, which is adding to inflationary pressures.
After stuttering at the start of Wednesday, both main contracts rose healthily in later trade with reports saying US stockpiles had fallen last week. Observers have warned the commodity could break above $100 soon.
The news out of Europe overshadowed data showing US producer prices rising twice as much as expected in January, adding to fears the Federal Reserve will embark on an aggressive campaign of monetary tightening.
“Factory-gate inflation remained very hot, prompting expectations for inflation to run hotter a little longer, and supporting the case for the Fed to kick off their rate hiking cycle with a half-point rate increase,” OANDA’s Edward Moya said.
Investors are now awaiting the release of minutes from the Fed’s January policy meeting, hoping it will provide clues about the pace and timing of any rate hikes.
Data showing UK inflation hit a 30-year high put pressure on the Bank of England to continue hiking rates, though a slowdown in Chinese price rises provided a little optimism that the country’s central bank could further loosen monetary policies to help its stuttering economy.
Key figures around 0820 GMT
Tokyo > Nikkei 225: UP 2.2% at 27,460.40 (close)
Hong Kong > Hang Seng Index: UP 1.5% at 24,718.9 (close)
Shanghai > Composite: UP 0.6% at 3,456.83 (close)
London > FTSE 100: UP 0.1% at 7,599.26
New York > Dow: UP 1.2% at 34,988.84 (Tuesday close)
- AFP with additional editing by Sean O’Meara