Monitors displaying stock index prices and the Japanese yen to US dollar exchange rate are seen after the New Year’s Eve ceremony marking the opening of trading in 2022 at the Tokyo Stock Exchange (TSE), amid the coronavirus disease (COVID-19) pandemic, in Tokyo, Japan January 4, 2022. REUTERS/Issei Kato

SINGAPORE/HONG KONG, Feb 22 (Reuters) – Global stocks fell as safe havens rallied and oil surged on Tuesday as Europe’s eastern flank was on the brink of war after the President Russian Vladimir Putin ordered troops to breakaway regions in eastern Ukraine.

MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) was on course for its worst day this month, down 2.1%, weighted by markets in Hong Kong and China. mainland China. The Japanese Nikkei (.N225) lost 2.5%.

US and European markets also braced for steep losses at the opening bell, with S&P 500 futures down 1.8%, Nasdaq futures down 2.5%, pan-regional Euro Stoxx 50 futures down 1.53% and FTSE futures down 0.89%.

By contrast, Brent crude oil futures rose 1.5% to $96.85, after hitting a new seven-year high of $97.21 at the start of the session on fears that energy exports from the Russia are disturbed. Spot gold added 0.2% to $1,909.10, after hitting a new six-month high at $1,911.56.

Putin on Monday recognized two breakaway regions in eastern Ukraine as independent and ordered the Russian military to launch what Moscow called a peacekeeping operation in the region, upping the ante in a crisis which could start a major war. Read more

A Reuters witness early Tuesday saw columns of military vehicles, including tanks, on the outskirts of Donetsk, the capital of one of the two breakaway regions, and Putin signed treaties with the leaders of the two breakaway regions giving Russia the right to build military bases. Read more

Washington and European capitals condemned the decision, promising new sanctions. The Ukrainian Foreign Minister said he was assured of a “resolute and united” response from the European Union.

However, a Biden administration official said Russia’s move did not yet constitute a “new invasion” that would trigger a broader set of sanctions, as it did not deviate from what Russia had already done. .

Following Russia’s latest move, “we are much closer to a military intervention, which of course will mitigate a lot of the risk to market sentiment,” said Carlos Casanova, senior Asia economist. at UBP, adding that the short-term volatility in the markets was caused by both geopolitical factors and the US Federal Reserve was “relentless”.

Casanova said the consequences would be higher oil prices, a sell-off in stocks and people flocking to safe-haven assets like the Japanese yen.

In Hong Kong, shares of Russian aluminum producer OK Rusal fell 22.1% to HK$6.18, their biggest daily percentage drop since April 2018.

Away from Russia and not helping the Hong Kong market, Hong Kong-listed Chinese tech stocks (.HSTECH) fell 2.7%, heavyweights Tencent (0700.HK) and Alibaba (9988.HK ) both being affected by speculation of a new wave. regulatory control.

QUIETER COINS

In currency markets, movements were more subdued, with the exception of the Russian ruble which hit an 18-month low at the start of Asian trading, before stabilizing.

The Japanese yen retreated at the start of its gains that had taken it to a near three-week high of 114.50 to the dollar, with its other safe haven, the Swiss franc, holding steady near the one-month high of the day before, and the euro fell 0.2% to a one-week low of $1.1286,

“Currency markets aren’t really showing the same level of caution as equity markets,” said Matt Simpson, senior market analyst at City Index.

“When you read the headlines…you expect to see some follow through in the markets. We’re in stocks but we’re not in currencies,” he said.

“Interestingly, overnight the Swiss franc was the safe haven, not the Japanese yen.”

The jitters also sent U.S. Treasury yields lower, with benchmark 10-year Treasury yields plunging as much as 7 basis points to 1.846%. Bets on Federal Reserve rate hikes have also eased, and the odds of a 50 basis point hike next month have fallen below 1 in 5.

US policymakers have publicly argued over how aggressively to begin the tightening.

Federal Reserve Governor Michelle Bowman said Monday she would assess incoming economic data over the next three weeks to decide whether a half-percentage-point interest rate hike was needed when the next central bank meeting in March. Read more

Reporting by Tom Westbrook in Singapore and Xie Yu in Hong Kong; additional reporting by Alun John in Hong Kong and Andrew Galbraith in Shanghai; edited by Jane Wardell & Shri Navaratnam

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