Portugal Colonial - Stock markets dip, oil surges as Ukraine worries return

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Stock markets dip, oil surges as Ukraine worries return
Stock markets dip, oil surges as Ukraine worries return

Stock markets dip, oil surges as Ukraine worries return

European and US stock markets headed lower while oil prices shot higher on Wednesday as investors tracked developments surrounding the Ukraine crisis and awaited fresh clues about the US Federal Reserve's interest rate plans.

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Asian stock markets mirrored strong rebounds on Wall Street and across Europe seen Tuesday on hopes Russia would not invade Ukraine after Moscow said some of its troops on the countries' border were pulling back.

But NATO warned Russia is continuing to mass forces for a possible invasion while the Russian parliament called on President Vladimir Putin to recognise Ukraine's two separatist republics as independent.

"While the Russians are saying one thing, NATO and the US are reporting that Russian troop numbers are rising near the Ukraine border, and that no de-escalation appears to be happening, making markets increasingly susceptible to headline risk," said CMC Markets analyst Michael Hewson.

"And so, the phoney war goes on, as the pullback in stock markets prompts a move into government bonds sending yields into retreat," he added.

Stock markets have swung sharply this week on developments in the Ukraine crisis.

"We're basically drifting from one crisis to another at the minute; from soaring inflation and higher interest rates to deteriorating living standards and now the prospect of conflict in Ukraine, which in turn exacerbates the first two," said OANDA analyst Craig Erlam.

"With tensions easing on the border, attention has quickly shifted back to inflation following some more disappointing figures this morning," he added.

UK annual inflation has hit the highest level since 1992, official data showed Wednesday, adding pressure to the cost of living and on the Bank of England to keep raising rates.

Global inflation has reached heights not seen in decades, largely owing to a surge in energy prices as economies reopen from pandemic lockdowns.

- Stubborn inflation -

World oil prices on Wednesday struck their highest levels since 2014, as investors grow increasingly worried about energy supplies in the event of a war between major producer Russia and Ukraine.

Observers have warned that oil could soon break above $100 per barrel.

"Volatility and uncertainty is just going to be heightened. That can be due to Russia-Ukraine, it could be due to stubborn inflation," Brenda O'Connor Juanas at UBS told Bloomberg Television.

US producer prices rose twice as much as expected in January, firming expectations that the Federal Reserve will from next month begin a series of US interest rate hikes.

Investors are awaiting the release later Wednesday of minutes from the Fed's January policy meeting, hoping it will provide clues about the pace and timing of rate hikes.

While the European Central Bank is sitting tight for now, it should start thinking about gradually withdrawing economic stimulus measures, as the risk of acting "too late" against soaring inflation grows, an ECB policymaker has told the Financial Times.

The comments late Tuesday by Isabel Schnabel, a member of the ECB's executive board, come as the eurozone experiences record-high annual inflation at 5.1 percent.

- Key figures around 1630 GMT -

New York - Dow: DOWN 0.6 percent at 34,796.36 points

EURO STOXX 50: DOWN 0.1 percent at 4,139.09

London - FTSE 100: DOWN less than 0.1 percent at 7,603.78 (close)

Frankfurt - DAX: DOWN 0.3 percent at 15,370.30 (close)

Paris - CAC 40: DOWN 0.2 percent at 6,964.98 (close)

Tokyo - Nikkei 225: UP 2.2 percent at 27,460.40 (close)

Hong Kong - Hang Seng Index: UP 1.3 percent at 24,675.63 (close)

Shanghai - Composite: UP 0.6 percent at 3,456.83 (close)

Brent North Sea crude: UP 2.7 percent at $95.83 per barrel

West Texas Intermediate: UP 3.0 percent at $94.87 per barrel

Euro/dollar: DOWN at $1.1369 from $1.1361 late Tuesday

Pound/dollar: UP at $1.3578 from $1.3541

Euro/pound: DOWN at 83.74 pence from 83.88 pence

Dollar/yen: DOWN at 115.45 yen from 115.62 yen

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