New York, Tokyo Markets in Asia reacted negatively to Russian troops shelling a nuclear power plant in Ukraine. While the Dow Jones index in the USA had lost only 0.3 percent on Thursday, the Nikkei dropped by 2.1 points to 26,020.60 points by the lunch break on Friday.
South Korea's Kospi index also started the day with a loss of more than one percent, Hong Kong's Hangseng index even with a minus of 2.5 percent. The Shanghai Composite Index still lost 0.7 percent in the first hour, the Straits Times Index in Singapore 0.4 percent.
"The alternate rally-sell-rally-sell pattern that began with the start of the Russia-Ukraine conflict continued Thursday as US stocks tumbled again," major bank ING told its Asian clients. But the growing concern about a further price hike from the already high commodity prices and further disruptions to the supply chain drove investors in Japan in particular.
In its cover story on Friday, Japan's business newspaper Nikkei warned that "many industries, including the auto industry, are preparing for disruptions in the global supply chain." The article focused primarily on palladium, which is used in autocatalysts, and the noble gas neon , which is used for laser-based lithographic processes in the semiconductor industry.
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Russia is the world's largest supplier of palladium, and Ukraine has a 70 percent share of the world market for neon. There is already an alarm mood, especially in the large chip locations South Korea and Taiwan.
Read here>> Ukraine war could hit Asian chip and battery production sensitively
David Wong, the technical analyst at the Japanese investment bank Nomura, judged that an interruption in the chip supply chain does not represent an "immediate" risk. But according to industry estimates, manufacturers only stock neon for six months.
In the short term, Wong warns that restrictions in airspace and other modes of transport pose a risk even in the short term. A possible failure of the railway connection between China and Europe will also exacerbate the problems in China's exports, according to Robin Xing, economist at Morgan Stanley Asia, in an analysis. "The link accounts for eight percent of trade between China and Europe."
Car and chip manufacturers sag, oil companies and shipowners win
These concerns were reflected in the prices of individual companies. Car manufacturers, chip and electronics manufacturers lost particularly heavily in Japan. Toyota's share price dropped by more than three percent at times, Honda's and Nissan's by 4.6 percent until just before the lunch break.
The chip manufacturer Renesas lost 4.5 percent in value, Tokyo Electron, a supplier of production equipment in the chip industry, and Sony each 3.8 percent. South Korea's electronics group Samsung Electronics, the world's largest supplier of memory chips, also buckled by more than two percent in morning trading.
However, the winners of the fear of rising raw material costs were once again the oil companies Idemitsu and Inpex, which continued to chase prices after initial losses. After a long, deep valley, the share prices of both companies are at their highest since the end of 2018. The share price of the major shipping company NYK even rose by 2.3 percent to 12,000 yen. That is more than six times as much as at the end of 2020.
The US is leading the way
The volatile mood on the US stock markets continued. After the positive trend on Wednesday, the three major indices closed in the red on Thursday. The oil markets were particularly turbulent. This has fueled renewed debate in the US about the threat of stagflation, with prices rising as the economy cools.
And that's still the best scenario for stocks, independent capital market consultant Ed Yardeni points out. “The US Federal Reserve always talks about having all the necessary tools to fight inflation. But the only tool I know of is to raise interest rates so much that it leads to a recession," he told Bloomberg TV.
However, he does not assume that Fed Chair Jerome Powell will do so. "Instead, we will live with higher inflation and higher interest rates without sliding into a recession for the foreseeable future," believes Yardeni. Equity markets would adjust accordingly. That would be a markedly different sentiment than investors have experienced over the past two years. At that time, the central bank, with its ultra-loose monetary policy, promoted sharply rising and sometimes overheated stock markets, especially for technology companies.
Nasdaq with the biggest losses
Meanwhile, Nasdaq tech stocks were the worst performers on Thursday. It lost 1.5 percent and closed at 14,035 points. The Dow Jones ended 0.3 percent down at 33,794 points, the market-wide S&P 500 closed 0.5 percent lower at 4363 points.
Software providers Okta and Snowflake were among the biggest losers. They fell by eight and 15 percent, respectively. Salesforce and Adobe each lost over two percent. Tesla closed 4.6 percent down.
Citigroup's strategists are still optimistic. "We are still in favor of buying in phases of weakness and point out that stocks worldwide have risen 10 to 20 percent after geopolitical crises," wrote strategist Robert Buckland in a recent analysis.
US futures fall overnight
US index futures fell sharply overnight. Reports from the night suggest that a fire broke out at Europe's largest nuclear power plant after heavy shelling. Dow Jones futures fell more than 400 points, or 1.28 percent, the broader S&P 500 1.18 percent, and the tech-heavy Nasdaq 1.27 percent. Dax futures were also down more than one percent during the night.
Take a deep breath in US government bonds
The 10-year Treasury yield ended slightly weaker — at 1.85 percent after posting its biggest one-day gain in two years a day earlier.
David Grecsek from the asset manager Aspiriant assumes that there will also be increased fluctuations in bonds and their returns. After all, there are opposing forces that are currently affecting the market. On the one hand, investors would flee to safe havens and thus increase the demand for bonds. But real yields are negative, which may deter some. Yields fall when bond prices rise.
Japan provided an example of the unrest. In contrast to the USA, interest rates on ten-year government bonds there rose by 0.005 percentage points to 0.16 percent.
Iran in the focus of oil investors
WTI crude oil hit $116 a barrel, its highest level since 2008, but then fell sharply to close at just over $107. The change of direction followed after positive signals from Iran. Talks on reviving the nuclear agreement have made good progress, it said on the market.
A conclusion of the nuclear deal would enable oil exports from Iran and thus counteract impending bottlenecks. This trend also continued in Asia. Dubai crude fell $3.90 to $108.70 a barrel.
Meanwhile, the rally in base metals continued. Zinc hits highest level since 2007, aluminum prices hit record high. Investors continue to worry about the impact of the Ukraine war on the economy and supply chains.
The government of US President Joe Biden imposed further sanctions on Russian oligarchs on Thursday and signaled that energy sanctions are not yet off the table. This led to additional uncertainty. Above all, further rising oil prices would "cause headwinds, no question about it," said Mark Stoeckle, head of asset manager Adams Funds.
Downtrend for Bitcoin and Co.
The major currencies in Asia were mostly quite stable. The dollar lost only slightly against the yen, which is often used as a safe haven during crises. Only the euro fell more than one percent against Japan's national currency at times.
Cryptocurrencies were again weaker on Thursday. Market leader Bitcoin was almost four percent down and cost $ 42,471. The second-largest digital currency, Ether, lost 4.5 percent to trade at $2,833. The Securities and Exchange Commission in the USA and the Treasury Department had recently indicated new regulatory measures.
The US wants to ensure that Russia does not use digital money to circumvent sanctions. Crypto exchanges such as Coinbase, Kraken and Binance are particularly in focus. In the meantime, however, according to the current status, Russian citizens who are not affected by sanctions are allowed to carry out crypto transactions. Meanwhile, Ukraine, which is taking advantage of virtual coins more than any other nation, has refrained from launching its own digital currency. At the beginning of the week, Digital Minister Mykhailo Fedorov hinted at such a plan via Twitter.
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