Asia shares track Wall Street rebound amid Ukraine conflict; STI up 0.56%

SINGAPORE (REUTERS, BLOOMBERG) - Singapore’s Straits Times Index pared gains earlier in the day to close at 3,294.47 yesterday. That is still up 0.56 per cent from Thursday’s close, in line with a recovery in Asian shares.

Investors rediscovered their risk appetite overnight after some initial sharp losses, with major United States indexes posting gains on Wall Street on Thursday, lead by tech stocks.

However, US share futures slipped in early Asian trade, with S&P500 e-mini futures losing 0.61 per cent and Nasdaq futures down 0.92 per cent.

Analysts worry any rallies might be fleeting.

"Biden's sanctions and reluctance to pour troops in is providing some relief. But this conflict is going to be a protracted issue and add to global inflationary pressures that will keep central banks on track for tightening," said analyst Kyle Rodda at IG Markets in Melbourne.

"It's okay for now, but in the long term the market will be tracking to the downside," he said.

Oil prices, which jumped when the Russian invasion began on Thursday before falling back, rose again on Friday on worries about supply disruptions. Brent crude futures were up 2 per cent at US$101.20 a barrel, while US West Texas Intermediate (WTI) crude also rose to US$94.46, although both benchmarks were off their highs.

Spot gold, however, fell 0.4 per cent to US$1,910.96 per ounce, having earlier touched its highest level since September 2020 at US$1,973.96 as investors sought safe haven.

The yield on 10-year US Treasuries was at 1.95 per cent after an initial slide to 1.84 per cent on Thursday, its biggest daily drop since late November.

The US dollar index, which measures the greenback against a basket of major currencies, eased 0.12 per cent to 96.98, having risen on Thursday to levels last seen during the first wave of the coronavirus pandemic. The Russian rouble was at 83.43 against the dollar, clawing back from a record low of 89.986.

Ukrainian President Volodymyr Zelenskyy said late on Thursday a new iron curtain was descending over Europe.

Ukrainian soldiers battled Russian troops as they poured in from three sides while about 100,000 people fled their homes, according to the United Nations, many hunkering down in basements and subway stations to escape shelling. The Ukrainian authorities said 137 people had been killed on the first day of fighting.

Western nations redoubled their efforts to crimp Russia's ability to do business, freezing bank assets and cutting off state-owned enterprises. But they stopped short of disconnecting Russia from the Swift international banking system or targeting oil and gas, which some analysts said had helped markets to recover.

US Federal Reserve officials signalled they remain on track to raise interest rates next month despite geopolitical uncertainty.

Among them was Cleveland Fed president Loretta Mester, who said that "barring an unexpected turn in the economy, I believe it will be appropriate to move the funds rate up in March and follow with further increases in the coming months".

Money market traders have pared back slightly their expectations for central bank hikes this year, but they still see the Fed implementing around six quarter-point increases.

Meanwhile, European Central Bank officials said the repercussions of Russia's invasion of Ukraine may delay but not stop an exit from stimulus this year.

"How is the Fed going to react to this geopolitical risk?" Ms Frances Stacy, director of strategy at Optimal Capital Advisors, said on Bloomberg Television. "That's where we're seeing spikes, where we start to try and reprice speculation around that."

Russian assets nosedived on Thursday, spurring emergency action from the country's central bank. Almost US$200 billion in stock market value was wiped out, and roughly a third of the sovereign debt's value.