Oil prices climbed back above $100 a barrel as Russian troops advanced on Ukraine’s capital Kyiv, with wheat prices hitting a 13-year high on the threat of supply disruptions following a volatile day of trading on Wall Street.
Brent crude, the international benchmark, rose 2.9 per cent to $101.90 a barrel while US marker West Texas Intermediate was up 2.8 per cent at $95.45.
Brent surged to almost $106 on Thursday as explosions rocked Kyiv but had settled at about $99 after US president Joe Biden revealed sanctions against Russia that spared energy exports.
Commodities markets continued to soar as the attack threatened supply chains, with wheat prices in Chicago jumping as much as 2.8 per cent to $9.6075 a bushel, the highest level since 2008.
Chinese wheat futures trading in Zhengzhou also leapt as much as 5.7 per cent to a record high of Rmb3,260 ($516) a metric tonne over the threat to shipment disruptions. Together, Ukraine and Russia account for a third of the world’s wheat exports.
In Asia, Hong Kong’s benchmark Hang Seng index initially rose 0.4 per cent after closing the previous session down more than 3 per cent. Japan’s Topix index was up 0.8 per cent and in Australia, the S&P/ASX 200 gained 0.2 per cent.
The mild gains in Asia followed a day of volatility on Wall Street, where the S&P 500 fell as much as 2.6 per cent before closing 1.5 per cent higher. Traders in New York attributed the swing to hedge funds unwinding bets that stocks would fall in response to the outbreak of war.
Traders said hedge funds in Asia, as with those in New York, were seeking to reduce exposure in response to heightened market volatility, covering their short positions by buying the underlying stocks or exchange traded funds and providing a slight boost to the broader market in the process.
“It’s short cover,” said Andy Maynard, a trader at investment bank China Renaissance. “They haven’t got anything to sustain the buying . . . this is definitely not bottom fishing.”
The head of another brokerage warned that even after short covering on Friday in Hong Kong, there was “still quite a big short position being carried forward” as markets braced for more disruption caused by the invasion.
Stock futures suggested a similar short covering dynamic could play out during the European trading day, with the Euro Stoxx 50 primed to rise 2.1 per cent after closing Thursday’s session 3.6 per cent lower. By comparison, the S&P 500 was expected to open 0.4 per cent lower on Wall Street later in the day.
In China, where officials have voiced strong support for Russian president Vladimir Putin’s invasion and short selling of individual stocks is forbidden, the CSI 300 index of Shanghai- and Shenzhen-listed shares rose as much as 1.8 per cent after finishing the previous session 2 per cent lower.
Global investors continued to dump risky assets such as stocks in favour of havens, with gold rising 0.5 per cent to $1,914.85 per troy ounce.
The US dollar was steady after notching gains on Thursday as European currencies, including the euro and sterling, sold off, with the dollar index off about 0.2 per cent on Friday at 96.86.
