Asian stocks extend losses as oil prices rise

TOKYO

Stocks fell in Asia on Tuesday after Wall Street posted its biggest drop in more than a year as markets were rocked by another surge in oil prices.

Benchmarks fell in Tokyo, Sydney, Hong Kong, Seoul and Shanghai after the S&P 500 fell 3%.

The surge in the price of oil above $130 a barrel on Monday was triggered by the possibility that the United States would ban crude imports from Russia. Oil prices stabilized later in the day and were moderately higher early Tuesday.

A third round of peace talks between Ukraine and Russia failed to produce major results. A senior Ukrainian official said there was minor, unspecified progress towards establishing safe corridors for civilians to escape the fighting.

But Russian forces continued their bombardment as food, water, heat and medicine became increasingly scarce in Ukraine.

Soaring prices for oil and other vital commodities are rocking global markets and the situation remains uncertain as investors seek safe havens from the extension of sanctions against Russia.

Analysts expect the war in Ukraine to be at the top of the agenda for some time and say the full impact of the conflict has yet to be fully considered.

“Disruptions in energy markets and the possibility of a geopolitical paradigm shift create a highly unpredictable environment,” Stephen Innes of SPI Asset Management said in a commentary. However, he added, “we should reach a point where stocks will start to appreciate in a light at the end of the tunnel.”

Japan’s benchmark Nikkei 225 lost 1.7% in afternoon trade to 24,783.70. Australia’s S&P/ASX 200 fell 0.8% to 6,980.30. The South Korean Kospi slipped 0.8% to 2,631.49. Hong Kong’s Hang Seng fell 0.5% to 20,956.39, while the Shanghai Composite fell 1.2% to 3,333.49.

On Monday on Wall Street, the S&P 500 fell 122.78 points to 4,201.09. The Dow Jones Industrial Average fell 2.4% to 32,817.38.

The tech-heavy Nasdaq composite slid 3.6% to 12,830.96 and is now 20.1% below its record high set in November. This means the index is in what Wall Street calls a bear market. The S&P 500 is down 12.4% from its peak in early January.

Gold – a measure of nervousness on Wall Street – also rose, but not as much as when oil prices peaked. The price of gold briefly touched $2,007.50 an ounce. On Tuesday afternoon, it was at $1,995.88, down 0.1%.

Benchmark U.S. crude rose $2.67 to $122.07 a barrel in electronic trading on the New York Mercantile Exchange. It stood at $119.40 a barrel on Monday, up 3.2%, after hitting $130.50 earlier. Brent crude, the international price standard, added $3.75 to $126.96 a barrel. It had stood at $123.21 a barrel, up 4.3%, after rising above $139 previously.

Concerns are growing that Russia’s invasion of Ukraine will upset already limited oil reserves. Russia is one of the world’s largest energy producers, and oil prices were already high before the attack as the global economy demands more fuel after its coronavirus-caused shutdown.

A U.S. ban on imports of Russian oil and other energy products, if passed, would be a major step for the U.S. government, although the White House has said it hopes to limit disruptions in oil markets and limit increases price at the gas pump.

Reports have also indicated that US officials may consider easing sanctions against Venezuela. This could potentially free up more crude oil and ease concerns about dwindling supplies from Russia.

A gallon of regular already costs an average of $4,065 across the country after breaking the $4 barrier on Sunday for the first time since 2008. A month ago, a gallon averaged $3,441, according to AAA.

The war is putting further pressure on central banks around the world, with the US Federal Reserve set to raise interest rates later this month for the first time since 2018. Higher rates are slowing the economy , which will hopefully help curb high inflation. But if the Fed raises rates too quickly, it risks pushing the economy into recession.

“Their reaction to geopolitics can’t really be gauged, so there’s uncertainty around that,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.

Beyond the sanctions imposed on Russia by governments because of its invasion of Ukraine, companies are also imposing their own sanctions. The list of companies leaving Russia has grown to include Mastercard, Visa and American Express, as well as Netflix.

On Wall Street, shares of Bed Bath & Beyond soared 34.2% to $21.71 after billionaire Ryan Cohen’s investment firm took a nearly 10% stake in the company and recommended big changes. Cohen is the co-founder of Chewy, and he gained something of a cult following after taking a stake in GameStop, the struggling video game chain that eventually named him chairman of the board.

Treasury yields climbed, with the 10-year rising to 1.78% from 1.72% on Friday night.

In currency trading, the US dollar fell from 115.32 yen to 115.48 Japanese yen. The euro traded at $1.0865, down from $1.0853.

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AP Business Writers Stan Choe and Alex Veiga contributed.