Kanupriya Kapoor

(Reuters) – A sell-off in global stocks continued into Asia on Wednesday morning as investors shifted from riskier assets to safer havens like the U.S. Dollar and government bonds.

The uncertainty in the U.S. rate rises and a surge in inflation, as well as the threat of war in Ukraine, caused financial markets to be rattled by slowdown fears from China. However, Beijing remained firm in its COVID-19 lockdowns.

The MSCI global equity index fell to its lowest level in 13 months after news of Russia’s cutting off gas supplies to Eastern Europe.

The selling continued in Asia with MSCI’s Asia-Pacific broadest index, which is MSCI’s largest and most comprehensive index outside of Japan, down 1.1% to the lowest point since March 15th. Tokyo’s and Seoul’s index were also down sharply by 1.8% and 1.19% respectively.

Chinese blue chip shares were flat following a drop of 0.72% in Hong Kong benchmark on Tuesday. Australian shares fell by 0.73%.

“The main catalysts to the declines in the last few days were more bellicose language from Russia regarding Ukraine and the announcement that Bulgarian gas supplies will be stopped from today by Russia,” ING wrote in a note.

Russia has demanded payment in rubles by Russia for the gas it uses to power its missiles. This is in response to sanctions imposed on Ukraine’s invasion. Russia announced that supplies will be stopped to Poland and Bulgaria starting Wednesday.

Oil and gas prices rose due to the move. It was seen as an important escalation. Futures rose 1.1% to $106.10 per barrel at 0019 GMT. U.S. West Texas Intermediate crude oil futures increased 84cs or 0.8% to $102.54 per barrel

China’s central bank stated this week that they would continue to support the country’s economy amid increasing concerns over Beijing’s refusal to change its “zero-COVID” policy, which would lead both to domestic and international growth. It also added more supply problems.

Dollar rallied to 102.34 against a basket currency this week. Gold also rose to $1,903 per ounce, a new two-year high.

Safety flows also support the yen. The currency rose to new highs, reaching a peak of 126.96 in one week. Overnight it enjoyed its highest day since more than two decades on the struggling British Pound.

According to analysts, markets are concerned that an expected string of Federal Reserve rate hikes will hurt growth right as many economies begin to bounce back from pandemic-driven slumps.

In the aftermath of the Ukraine conflict, investors have been worried about the volatility in commodity prices. The International Monetary Fund warned this week that there are stagflationary risk in Asia.

Wall Street sold off overnight, highlighting investor concern about earnings. With the Nasdaq falling 4% (its lowest point since late 2020), it was the worst performance in the Nasdaq’s history. After market close, Google’s parent Alphabet (NASDAQ:) Inc reported its first quarterly revenue miss of the pandemic and was down about 3%. Microsoft Corp (NASDAQ:) It fell by 4% in advance of its results, but it recovered when it predicted double-digit revenue growth next fiscal year.

Futures on Nasdaq were lower by 0.2%

Ross Mayfield is an investment strategist with Baird, Louisville, Kentucky.

U.S. Treasury yields also fell after safety-bid. Benchmark yield dropped by 5.5 basis point to 2.772%. Three-month bills yielded 3.772% and 30-year bonds yielded 2.772% were both lower.