Asian Fell Sharply as Record Surge in Commodity Prices Hurt Expectation of Economic Recovery

Asian shares fell sharply as the war in Ukraine and sanctions on Russia sent prices of commodities particularly oil to record high that is expected to hurt economic recovery from COVID-19 pandemic.

The CSI300, HSI, KOSPI and TOPIX inched down sharply by 1.14%, 0.87%, 0.03% and 1.81% respectively.

WTI and Brent trading sharply higher above $100 as steps to tap reserves failed to ease worries over supplies as penalties mount on resource-rich Russia for invading its neighbor. An index of commodities jumped the most since 2009 to a record. The conflict is a threat to flows of energy, crops and metals, which were already tight.

Treasuries held most of that push higher with the 10-year yield at about 1.76%. Gold and the dollar retained much of their recent gains too.

Meanwhile, economic risks are tempering expectations for how steeply the Federal Reserve will raise interest rates. Markets have priced out any risk of a half-point March liftoff. Traders in the U.K. and Europe have also dialed back rate-hike bets.

“The Fed is going to have to continue to tamp down inflation, which I think is invariably going to get worse before it gets better,” Kathryn Rooney Vera, head of global macro research at Bulltick LLC, said on Bloomberg Television as reported by Bloomberg.

“We said stagflation is the biggest risk this year and that’s going to be the case.”

Russia said it would press forward with its invasion of Ukraine as the conflict enters a more brutal stage. At the same time, moves to isolate and pressure Russia’s financial system and economy are gathering steam.