Asia report: Stocks mixed as oil prices continue to surge

Stocks were mixed at the end of the day in Asia on Wednesday, as oil prices rose while traders continued to weigh the latest developments in Russia’s invasion and assault on Ukraine.

In Japan, the Nikkei 225 was down 1.68% at 26,393.03, as the yen weakened 0.29% against the dollar to last trade at JPY 115.25.

Technology conglomerate SoftBank Group managed gains of 0.65%, while among the benchmark’s other major components, automation specialist Fanuc slid 3.64%, and fashion firm Fast Retailing slipped 0.06%.

The broader Topix index was 1.96% by the end of trading in Tokyo, closing at 1,859.94.

On the mainland, the Shanghai Composite slipped 0.13% to 3,484.19, and the smaller, technology-heavy Shenzhen Composite was 0.56% lower at 2,313.18.

South Korea’s Kospi returned from a public holiday on Tuesday to eke out gains of 0.16% to 2,703.52, while the Hang Seng Index in Hong Kong lost 1.84% to 22,343.92.

The blue-chip technology stocks were mixed in Seoul, with Samsung Electronics down 0.55%, while SK Hynix rose 1.21%.

Oil prices continued their unabated march higher at the end of the Asian day, with Brent crude last up 4.8% at $110.01 per barrel, and West Texas Intermediate ahead 4.75% at $108.32.

The rise in prices for the thick black stuff came despite the International Energy Agency announcing it would release 60 million barrels from global reserves on Tuesday.

Canada’s federal government announced it would stop imports of Russian oil on Tuesday, with political pressure being turned up in Washington for a similar decision to be made in the United States.

“Russia is starting a new phase of the campaign, bringing a lot more force to bear and shelling civilian areas,” said Neil Wilson at Markets.com.

“This poses the risk that the West will encounter growing pressure to sanction Russian oil and gas exports, with all that would entail.”

Wilson noted that Centrica was “urgently seeking” to end its natural gas supply agreement with Gazprom, meaning self-sanctioning was “already well underway”, while ExxonMobil followed Shell and BP to say it would exit Russia, leaving $4bn in assets in doubt.

“We are seeing this with the container ships too, and banks - moreover, oil traders are already starting to try to secure alternatives.

“We should note that rising oil prices are a windfall for the Kremlin and Russia’s terms of trade - the ratio of its export to import prices - is at its highest since oil prices fell in 2014.

“This is one of the reasons why Western governments might play this card - the cognitive dissonance of squeezing Russia on all fronts with sanctions while still funding their war machine by buying oil and gas may not survive for long.”

The other reason, Neil Wilson said, would be mounting pressure from electorates as bombing on civilians increased, leading to “more deaths and distressing scenes” on Western television.

“OPEC+ convenes later this morning and is seen maintaining the current pace of production increases, sticking to the incremental 400,000 barrels per day.

“The cartel’s technical experts lowered their expectations for the daily oil market surplus by 200,000 barrels to 1.1 million barrels.

“Their estimates showed fuel stockpiles in developed nations will be some 62 million barrels below the 2015 to 2019 average by the end of 2022, having previously forecast a shortfall of 20 million barrels.”

However, Wilson said the market was not really moving on that as much as just pure fear of immediate disruption to supplies - traders “are getting hold of barrels at any price”.

In Australia, the S&P/ASX 200 was ahead 0.28% at 7,116.70, as fresh economic data out of Canberra showed the country’s economy growing ahead of expectations in the fourth quarter of 2024.

According to the Australian Bureau of Statistics, Australia’s GDP expanded 3.4% quarter-on-quarter, beating forecasts for a gain of 3%, according to Reuters polling.

Across the Tasman Sea, New Zealand’s S&P/NZX 50 was 0.89% lower at 12,088.75, led south by retirement property developer Ryman Healthcare, which was down 4.8%.

The down under dollars were both stronger on the greenback, with the Aussie last ahead 0.16% at AUD 1.3764, and the Kiwi advancing 0.14% to NZD 1.4782.