By Andrew Galbraith

SHANGHAI, (Reuters) – Asian shares plunged on Friday after the largest quarterly decline in global equities for two years. This was due to investors concerned about the Russian-Ukrainian conflict and the rising risk of recession.

Russian President Vladimir Putin reacted to Western sanctions against Moscow on Thursday by threatening to stop European gas supplies if they don’t pay in Russian rubles. Germany was the country most dependent on Russian gas and accused him of “blackmail”. It activated an emergency plan which could result in rationing.

A Bank of Japan survey revealed that Japanese business confidence fell to nine months in the first quarter, reflecting the dark mood caused by supply disruptions and rising raw materials costs. Companies indicated they were expecting worsening conditions.

Tokyo’s stock index was down 0.75 percent in morning trade. However, MSCI’s largest index of Asia-Pacific shares other than Japan was 0.70% higher.

Hong Kong’s index dropped 1.1% while Seoul’s Kospi fell 0.6%. The Chinese blue-chips saw a turnaround from lower levels to increase 0.7%

In the last quarter ending March 31, MSCI’s global index of shares, as well as the U.S. share and European shareindices all saw their greatest quarterly falls since the outbreak in 2020 COVID-19 pandemic. Investors were concerned that rising prices could lead to global central bank rate increases, which may trigger recessions.

However, the U.S. share drops conceal a recent rebound in the index. It rose from an almost-13% drop to close the quarter at 5%. This defies concerns about tighter monetary policies and global instability and is in direct contrast to the signals sent to bond markets.

Christopher Wood from Jefferies said that a possible end to the Ukraine war would make it more difficult for the Fed’s to follow its hawkish line. “The rally in growth stocks and related fall in credit spreads mean an improvement of financial conditions.

“The Fed must tighten, despite political pressure,”

The U.S. monthly jobs report for March will be available later in the day to investors looking for signs of inflation.

After briefly inverting, the closely-watched spread between U.S. 2-year and 10-year bills was just above zero Friday morning.

A U.S. Yield curve inversion is considered to be an indicator that there could be a recession in one to two year.

Benchmark 10-year Notes yielded last Thursday 2.3781% from 2.325%. The 2-year yield, however, was 2.335% from 2.284%.

After a sharp drop in oil prices on Thursday, the market stabilized following Washington’s announcement about its largest ever release of U.S. oil emergency reserves. It was part a wider effort to control inflation.

While the last drop was around 0.1% at $100.18/barrel, the global benchmark was 0.12% higher at $104.84.

Dollar, which has been boosted by safe-haven flows as well as expectations for rising U.S. rate, held firm Friday. Comparable to its peers, the greenback gained 0.08% at 98.596 and 0.5% at 122.33.

Euro rose to $1.1069.

After its largest quarterly gain in over two years, gold was steady. The last time gold was quoted as $1,937.05 an troy ounce. [GOL/]