ASX futures had sunk 72 points, or 1 per cent, to 7087 near 8.00 am AEST, indicating a downbeat start to trade.
Futures for the S&P 500 fell nearly 1.3 percent on Monday, while contracts for the tech-heavy Nasdaq 100 slipped 1.9 percent and futures for the Dow Jones Industrial Average lost 0.9 percent. The US stock markets were closed on Monday for Presidents Day.
Russia overnight held a ceremony at the Kremlin to recognise two separatist regions in eastern Ukraine, Donetsk and Luhansk. Soon after he deployed troops into both areas on a “peacekeeping mission”. US, UK and European leaders have denounced the move.
In a separate statement a Russian army spokesman says it has destroyed two Ukrainian vehicles in territory under Russia's control.
The pan-continental Stoxx Europe 600 dropped 1.3 percent. MOEX, Russia’s main stock index, sank 10.5 percent, its biggest one-day percentage fall since March 2014, when Russia invaded Crimea.
The S&P/ASX 200 closed up 0.2% at 7233.6 on Monday. The benchmark index had fallen 0.9% in early trade on worries over escalation in Ukraine, but sentiment turned on the prospect of a meeting.
The utilities sector made the largest gains, up 3.7% as AGL shares surged 11% on takeover interest.
Heavyweight financials gained 0.6% and consumer staples were 2.3% higher, with Endeavour spiking 10% higher after the drinks and hospitality group reported a stronger than expected 1H profit.
On Thursday, as reported by the Financial Times, tech billionaire Mike Cannon-Brookes and Canadian Asset Manager Brookfield have signalled that they are prepared to pursue a $5 billion bid for AGL Energy on a hostile basis. AGL’s board rejected the $7.50 per share bid earlier on Monday, saying it significantly undervalued the company.
The Shanghai Composite in mainland China and South Korea’s Kospi both finished little changed in Asia. Hong Kong’s Hang Seng fell nearly 0.7% and Japan’s Nikkei 225 lost 0.8%.
In commodities, gold futures added 0.3% to $US 1906.20 in a flight to perceived safe assets; Brent crude rose 3.4% to $US96.76 a barrel; Iron ore fell 4.2% to US$140.
In bond markets, the yield on the Australian 10-year bond eased to 2.21%. U.S. bond markets were shut for the President’s Day holiday. Yields fall when prices rise.
The Australian dollar was fetching 71.91 US cents at 8.00 am AEST, beating a previous close of 71.74. The WSJ Dollar Index, which weighs the US dollar against 16 other currencies, inched down to 89.68.
Asia
In Asia, Chinese stocks finished the session mixed, dipping from a broad uptick last week. The key Shanghai Composite Index fell 0.15 point to 3409.61, ending a multi-day rise. The Shenzhen Composite Index added 0.6%, and the ChiNext Price Index fell by 0.8%. Technology stocks were among the best-performing sectors, with IT-services providers, telecom-equipment makers and telecom carriers leading the upward move. But infrastructure firms like building materials suppliers and construction contractors declined.
Stocks in Hong Kong slumped with developers as new-home prices decreased for a fifth consecutive month in January, government data showed. The Hang Seng Index lost 0.6% and the Hang Seng Tech Index decreased 2.8%. Henderson Land, Wharf Real Estate Investment and New World Development fell 2.2%, 1.8% and 1.5%, respectively. Technology stocks were also hammered as concerns about regulation surfaced, after e-commerce platforms run by Tencent and Alibaba Group, which fell by 5.2% and 3.8%, respectively, appeared on the US government’s latest “notorious markets” list of organizations that allegedly sell or facilitate the sale of counterfeit goods.
Japanese stocks ended lower, as electronics shares weighed, with geopolitical uncertainty over Ukraine continuing to hit sentiment. Tokyo Electron slid 2.9% and Keyence declined 2.7%. Sharp Corp. dropped 10 percent after announcing it will buy out an unprofitable display affiliate. The Nikkei Stock Average reduced earlier losses and closed down 0.8%, after President Biden agreed to meet his Russian counterpart, if Russia backs away from a potential attack of Ukraine.
Europe
European stocks fell into the red, continuing to be clouded by rising political tensions in eastern Europe. The pan-European Stoxx 600 fell 1.3%.
The MOEX, Russia’s main stock index, plummeted 10.5 percent the largest percentage drop in a single day since March 2014, when Russia invaded Crimea.
Both Ukraine’s hryvnia and Russia’s ruble are extending losses against the US dollar after Russian President Vladimir Putin said on Monday evening that he would recognize the independence of two Russian-led breakaway regions of Ukraine. The ruble weakened 3.4% to the US dollar and the hryvnia lost 1% of its value.
IG says “European markets press further into red territory as the spectre of conflict in eastern Europe looms.”
“There seems to have been a determination among investors to continue the selling, burdened by Russia-Ukraine risk. And it increasingly does, with markets still firmly under pressure as a result.”
In London, the FTSE 100 was down 0.4 percent on Monday.
North America
Russian stocks, the ruble and European shares slumped as oil prices gained amid jitters at signs of escalation between Moscow and the West.
U.S. stock markets were shut Monday for Presidents Day after suffering losses last week as the prospect of an invasion of Ukraine, and doubts over the path of monetary policy, kept investors cautious. Futures for the S&P 500 fell nearly 1.3 percent Monday, while contracts for the tech-heavy Nasdaq 100 dropped 1.9 percent and futures for the Dow Jones Industrial Average lost 0.9 percent.
Russia said on Monday that it had destroyed two Ukrainian armoured vehicles within its territory, but provided no evidence of the alleged incursion. Ukrainian and Western leaders were warning that Moscow was looking for excuses to strike. The biggest standoff between Moscow and the West in years has followed Russia massing more than 100,000 soldiers at the border with Ukraine, and the US has warned that an invasion of its neighbour could come at any moment.
Brent crude, the global oil benchmark, jumped 3.4 percent to $96.69 a barrel. Gold futures, which have climbed in recent days amid investor demand for safe assets, added 0.3% to $1906.2.
Long-term investors are right to worry that a war between Ukraine and Russia may keep inflation high in developed economies for a longer time by disrupting supplies of key commodities. Russia is one of the world’s biggest sources of oil, the largest exporter of wheat, and a major producer of metals. Ukraine is a key global supplier of both corn and wheat.
“Markets struggle devilishly to assess geopolitical risk,” said Edward Park, chief investment officer at UK investment company Brooks Macdonald. “It’s been deteriorating and then improving sentiment over the weekend.” It looks like we’re going to have another week of uncertainty in any event.”
Investors are still trying to gauge how much and how fast the Federal Reserve will raise interest rates to get inflation under control. Some Fed officials have resisted expectations that they will start to lift interest rates in March, including a bigger move in the step-up in the benchmark rate, while others have kept a door ajar.
