Asian markets sink as Ukraine war, inflation hold sway on markets

The Shanghai Composite index
SHCOMP,
-2.16%
lost 2.2%, while the Kospi
180721,
-1.07%
in Seoul declined 1.1%. In Australia, the S&P/ASX 200
XJO,
-0.91%
gave up 0.8%. Stocks rose in Singapore
STI,
-0.01%
and Malaysia
FBMKLCI,
-1.14%,
but fell in Taiwan
Y9999,
-0.95%
and Indonesia
JAKIDX,
-0.59%.

Investors are fretting over how the world economy may struggle with price pressures and slowing growth.

A plan to revoke Russia’s most favored nation trade status over its invasion of Ukraine added to unease over the economic repercussions of the deepening conflict after talks between foreign ministers of the two countries failed to show any concrete progress.

President Joe Biden plans to announce the change Friday, according to a source familiar with the matter who spoke on the condition of anonymity to preview the announcement.

Pressure has been building in Washington to revoke what is formally known as “permanent normal trade relations” with Russia, allowing the U.S. and allies to impose tariffs on Russian imports.

Stocks slipped on Wall Street Thursday in choppy trading while oil prices bounced, with a barrel of U.S. crude jumping as much as 5.7%, before ending down 2.5%. A day earlier, benchmarks had surged to their biggest gain since June 2020 when a tumble for oil prices seemed to take some pressure off the world’s high inflation.

The S&P 500
SPX,
-0.43%
dropped 0.4% to 4,259.52. The benchmark index is now 11.2% below the all-time high it set early this year. The Dow Jones Industrial Average
DJIA,
-0.34%
fell 0.3%, to 33,174.07, while the tech-heavy Nasdaq composite
COMP,
-0.95%
slid 0.9% to 13,129.96.

Oil’s back-and-forth moves are just some of the waves buffetting markets. The European Central Bank said high inflation will push it to wrap up its bond-buying program meant to boost its economy faster than expected. In the U.S., a report showed that consumer prices leaped 7.9% in February from a year earlier. It’s the sharpest spike since 1982, though the reading was largely within expectations.

Volatility has become the norm since Russia’s invasion of Ukraine. It has raised worries about how high prices will go for oil, wheat and other commodities produced in the region.

Investors already were on edge before the war because high inflation is pushing central banks to raise interest rates for the first time since the pandemic began and halt programs launched to support the global economy.

Analysts said Thursday’s U.S. inflation report was exactly what economists were forecasting, and it did not include the most recent surge for oil and gasoline prices following Russia’s invasion of Ukraine. If anything, it may have offered some relief because it didn’t hit the 8% threshold that trigger alarm.

Many investors said the report likely won’t change anything for the Federal Reserve, which meets next week to vote on interest rates. It is expected to raise its key short-term rate by a quarter of a percentage point, which would be the first since 2018. Higher rates slow the economy, and the Fed is trying to raise them enough to tamp down inflation but not so much that it causes a recession.

Oil prices have moderated since their wild swings earlier in the week.

U.S. benchmark crude
CLJ22,
+0.23%
added 9 cents to $106.11 per barrel after falling Thursday by $2.68 to $106.02 per barrel.

Brent crude
BRNK22,
-0.03%,
the basis for international pricing, lost 28 cents to $109.05 per barrel.

Both it and U.S. benchmark oil are up more than 40% for 2022 so far, though they remain below the peaks they hit earlier this week, when U.S. oil briefly topped $130.

The yield on the 10-year Treasury, which tracks expectations for inflation and economic growth, wavered immediately after the inflation report’s release. It rose to 2% from 1.94% late Wednesday. Early Friday it was at 1.97%.

The U.S. dollar
USDJPY,
+0.32%
rose to 116.44 Japanese yen from 116.11 yen.