Asian markets are waiting for developments in Ukraine

New York, Tokyo Investors on Asia’s stock exchanges continued the trend from the USA in morning trading: they are slightly in the red. In the USA, the Dow Jones index fell by 0.5 percent to 34,566 points on Monday, and neither currency nor stock prices are moving significantly in Asia either.

Korea’s Kospi index and Singapore’s Straits Times index were trading around the previous day’s level on Tuesday morning. The two major Chinese indices, the Shanghai Composite Index and Hong Kong’s Hangseng Index, which are often driven by Chinese developments, also traded little.

Asia’s largest market hit the hardest: Japan’s Nikkei 225 index fell by just over 0.5 percent in the meantime and then went into the lunch break at 27,006 points, 0.27 percent below Monday’s closing price.

The major bank ING sees indications from Russia and other nations that there is still room for negotiations in the Ukraine crisis as the reason for this. This seems “to help dampen the turmoil that has gripped the markets in recent days,” ING said on Tuesday morning.

>> Read all the latest developments about Ukraine here: US moves embassy from Kiev to Lviv – US citizens should leave Belarus

Many Asian markets had lost significant value in the past few days. But the ING strategists do not believe in an actual turnaround: According to the strategists, it is unlikely that the willingness to take risks will return as long as there is no more concrete solution to the conflict.

Japan: Positive growth data does not influence investors

There is hardly any impetus for this from Asia, countries are more likely to join one of the conflicting camps: China has expanded its cooperation with Russia, while the US ally Japan is threatening sanctions in the event of a Russian attack on Ukraine. Details are currently being finalized jointly by the foreign, finance and economic ministries and coordinated internationally.

Not even positive economic data could move investors in Japan: In the last quarter of 2021, the gross domestic product of the world’s third largest economy was 1.3 percent higher than the previous quarter. This was not only the first increase after two negative quarters, Japan also grew again after the corona crisis of 2020 – albeit only moderately by 1.7 percent. This value is significantly worse than in neighboring countries: In South Korea, the economy grew by four percent, in the semiconductor stronghold Taiwan by as much as 6.3 percent and in China by 8.1 percent.

But Maki Sawada, a strategist at Japanese investment bank Nomura, also sees the downturn in stock prices as an opportunity to buy into companies cheaply. The prospect of rising interest rates in the USA and the uncertainty in Ukraine would weigh on prices, she said on Tuesday. Still, some stocks that are cheap from an investor’s perspective are at levels “where it’s easy to buy on a squeeze.” Still, Jefferies strategist Sean Darby warns, “Is the worst over? Not yet,” he says.

The US stock exchanges set the direction

The US markets set the mood in Asia. The tensions in Ukraine and the future interest rate policy of the US Federal Reserve also dominated discussions on Wall Street on Monday. The leading index Dow Jones closed 172 points or 0.5 percent in the red. The broader S&P lost 0.4 percent to close at 4,402 points. The Nasdaq technology exchange closed slightly weaker at 13,791 points.

All three major indices ended weaker for the third time in a row. Prices also fell on the stock markets in Europe. According to media reports, military action in the Ukraine conflict could take place as early as Wednesday. US Secretary of State Anthony Blinken announced the closure of the embassy in the Ukrainian capital, Kiev. It should be relocated to Lviv in the west of the country. Blinken referred to a “dramatic acceleration in the build-up of the Russian armed forces”. According to the Wall Street Journal, the US State Department orders the destruction of computer equipment.

A possible invasion of Ukraine would be a major risk for stock markets, Morgan Stanley’s equity strategist Michael Wilson warned in an analysis. For example, higher energy prices “would, in our view, destroy demand and send several economies straight into recession,” warns Wilson, who is known for his pessimistic views.

Also read about the Ukraine crisis:

The tense situation means that investors are also very sensitive to every headline. Oil prices rose. The price of the WTI strain climbed to its highest level since September 2014, trading at $93.89.

New discussions about the Fed

Concerns about war are also bringing monetary policy back into the focus of investors. Should the economy cool, that would also push the US Federal Reserve to take a less hawkish stance, according to Morgan Stanley’s Wilson. Fed Chairman Jerome Powell recently announced a much tighter monetary policy, with the first interest rate hike in March. Then the reduction of the balance sheet total should begin.

Stocks would remain in correction mode, Morgan Stanley strategist Wilson clarified. The broad S&P 500 is already down 8 percent this year. The technology exchange Nasdaq closed 15 percent below its recent all-time high on Monday.

Goldman Sachs is now expecting seven rate hikes this year instead of five. The bank also lowered its outlook for the stock market year and expects the S&P could gain just 2.8 percent this year.

UBS was more optimistic on Monday: “Despite the recent volatility, it’s important to remember that we’re still in an environment where the economy and corporate earnings are growing robustly,” said Mark Häferle, chief investment officer at UBS. He expects both geopolitical tensions to ease and inflationary pressures to ease. “That will cause the markets to rise again.”

>> Read here: If Russia gets serious: how will the stock market react?

James Bullard, head of the regional central bank in St. Louis, didn’t want to have anything to do with it. He spoke out in favor of fighting inflation more vigorously than previously planned. The central bankers were surprised by the sharp rise in prices, he admitted on the US stock exchange broadcaster CNBC. Consumer prices rose 7.5 percent in January compared to a year earlier. “That’s a lot of inflation,” Bullard said. He was therefore in favor of scaling back monetary policy support more quickly.

“Our credibility is at stake and we need to act on the data,” Bullard said. However, he assumes that this could happen without causing distortions in the markets.

Look at the individual values

Rivian: Star investor George Soros bought almost 20 million shares in the electric truck manufacturer in the fourth quarter of 2021. This emerges from the quarterly reports of his fund, which have now been published. The stake was worth about $2 billion at the time of purchase, but its value has since fallen to about $1.17 billion. Rivian papers rose 6.4 percent during trading.

Nvidia / AMD: Chip values ​​were in demand on the stock market, which had collapsed by an average of 4.6 percent on Friday. Nvidia and AMD increased by around one percent.
Moderna: The vaccine manufacturer’s shares fell 11.7 percent to $142.50. The group announced on Friday evening that top management had sold shares in the vaccine manufacturer. Like some other companies in the industry, the papers have been on a downward slide for a long time. In mid-August they were still trading at just under $500.

Blackstone: Australian gaming giant Crown Resorts has agreed to a takeover bid by New York-based investment firm Blackstone. As Australian media reported on Monday, citing the listed casino group, the US company further increased its purchase offer in January and offered 8.9 billion Australian dollars (5.6 billion euros). This corresponds to around 13 Australian dollars (8.20 euros) per share. Blackstone has been trying to acquire the company for a year. Crown had rejected previous, lower offers. Blackstone shares fall 1.97 percent.

Splunk/Cisco: A media report about a $20 billion takeover bid by network equipment supplier Cisco gives Splunk a boost. The software manufacturer’s shares rose at times by more than eight percent. “Splunk would be a great addition to Cisco on several levels,” writes BTIG analyst Gray Powell. He estimates the synergies alone at more than 3.5 billion dollars. Cisco shares, on the other hand, are down 1.3 percent.

lockheed Martin/Aerojet Rocketdyne: According to the US defense company, it is withdrawing its 4.4 billion takeover bid for the rocket engine manufacturer Aerojet Rocketdyne. The move comes after the FTC unanimously voted last month to challenge the deal over antitrust concerns. The acquisition, announced in late 2020, would have given Lockheed a dominant position in solid-fuel rocket engines – a key part of the US missile industry. Lockheed shares are down more than 2 percent, Aerojet shares are also down — more than 5 percent.

peloton: The new boss of the fitness equipment company Peloton has put a damper on speculation about the sale of the former Corona winner. Barry McCarthy told the Financial Times that he wouldn’t move from California to New York if he were anticipating an acquisition in the foreseeable future. Peloton shares were down about 6 percent in late U.S. trade after the comments were released on Monday. Investors had let the price rise sharply after media reports about an interest in buying from Amazon and Nike, among others.
With agency material.

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