HONG KONG — Asian markets rebounded and oil posted steep losses on Wednesday on hopes that Russia won’t invade Ukraine after Moscow said some of its troops on the countries’ border had started to remove.
Although unverified, Russia’s claims brought much-needed relief to investors, who grew fearful of a conflict in Eastern Europe after Western powers warned for days that an attack was imminent.
The news also helped traders rule out another surge in forecasts for the U.S. producer price index that some said could signal another painful jump in consumer inflation down the line.
The shares were sent into a spiral after a top US security adviser said on Friday that Russian President Vladimir Putin could send troops to Ukraine any day, adding to a series of risk issues plaguing the markets, including soaring prices, the end of central bank financial support and the coronavirus pandemic.
But the mood improved on Tuesday after the Russian Defense Ministry said some of the more than 100,000 soldiers massed around Ukraine in recent weeks had started returning to their barracks.
Then, after three hours of talks, Putin and German Chancellor Olaf Sholz held a press conference during which the Russian leader confirmed a “partial troop withdrawal” and said he was ready to seek diplomatic solutions to the crisis, adding that “of course” he didn’t want war.
“We are ready to continue working together. We are ready to embark on the path of negotiations,” Putin said. “We want to solve this problem now, now or in the near future, through negotiations, peaceful means.”
He said he hoped Western leaders would listen to his concerns about NATO’s expansion towards the Russian border and Ukraine’s possible membership.
Yet while Joe Biden said the United States was “ready for diplomacy”, he warned that Putin’s soldiers “remain in a very threatening position”.
While politicians remained wary, investors jumped on the positive developments.
All three Wall Street indexes jumped after three days of heavy losses, which were also stoked by inflation concerns.
And Asia built on early trade gains.
Tokyo gained more than 2%, while Hong Kong, Seoul, Wellington, Taipei and Manila jumped more than 1% each. Shanghai, Sydney and Jakarta were also up, although Singapore fell slightly.
Crude has stabilized, having fallen more than 3% on Tuesday as easing Russian-Ukrainian tensions tempered supply fears at a time of soaring demand, adding to inflationary pressures.
Both major contracts remain at more than seven-year highs and observers have warned that they could soon break above $100.
“Volatility and uncertainty will just escalate. It may be due to Russia and Ukraine, it may be due to stubborn inflation,” UBS’s Brenda O’Connor Juanas told Bloomberg. Television.
“There’s a lot more for customers and investors who are uncertain.”
News out of Europe overshadowed data showing US producer prices rose twice as much as expected in January, adding to fears that the Federal Reserve is embarking on an aggressive monetary tightening campaign.
“Factory gate inflation remained very elevated, prompting expectations that inflation would warm for a bit longer, and supported the case for the Fed to kick off its rate hike cycle with a half-point rate hike,” said Edward Moya of OANDA.
“Americans expect inflation to eventually come down next year, but they are increasingly nervous because the spike could be much worse than they originally anticipated. President Biden is expected to recognize the recent spike in food and gas prices, which means executive orders could be coming.
Investors are now awaiting the release of the minutes of the Fed’s January monetary policy meeting, hoping that it will provide clues on the pace and timing of any rate hikes.
Key figures around 02:50 GMT
Tokyo – Nikkei 225: UP 2.1% to 27,428.02 (pause)
Hong Kong – Hang Seng Index: UP 1.3% to 24,681.79
Shanghai – Composite: UP 0.7% to 3,469.46
West Texas Intermediate: FLAT at $92.08 a barrel
North Sea Brent Crude: DOWN 0.1% to $93.20 a barrel
Euro/dollar: DOWN to $1.1346 from $1.1361 on Tuesday evening
Pound/dollar: UP to $1.3543 from $1.3541
Euro/pound: DOWN to 83.78 pence vs. 83.88 pence
Dollar/yen: UP to 115.70 yen from 115.62 yen
New York – Dow: UP 1.2% to 34,988.84 (closing)
London – FTSE 100: UP 1.0% to 7,608.92 (closing)
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