Tom Westbrook

SINGAPORE, (Reuters) – Asian markets fell on Friday. Gold stood at an 8-month high following an exchange of fires in Eastern Ukraine. Investors were looking for security ahead of this weekend due to renewed U.S. warnings about a Russian invasion.

MSCI’s Asia-Pacific share index, which is the broadest, fell 0.3% in early trading. It fell by 1.4%. Each Australian share and Korean shares fell by 1%.

Wall Street witnessed a 1.8% drop in Dow Jones overnight, 2.1% decline for the Nasdaq and 2.8% falls for the Dow Jones. [.N]In eight months, gold reached a record $1.900 an ounce. It has maintained its gains.

“The Russian Invasion will cause panic in the market,” analysts from ANZ Bank wrote in a note.

Russian-backed rebels and Kyiv’s forces exchanged accusations that they had each fired over a ceasefire on Thursday. The U.S. president Joe Biden stated that his belief was that there would be a Russian invasion in the coming days.

As Russia seeks security guarantees including Ukraine not joining NATO, investors fear that a larger war will ensue. This is one of the most serious crises post-Cold War relations has seen. Investors are afraid for their safety.

Safe-haven currencies like the Japanese yen or Swiss franc rose overnight to new highs against the dollar. The yen was slightly higher in Asia, at 114.84 dollars.

Treasuries rallied, with the benchmark 10-year yield dropping seven basis points (bps), overnight, and two additional in Tokyo early trade to 1.9493%. Asia trade also saw two-year yields fall 2 bps, to 1.4436%.

These moves are intended to undo the initial relief that had caused asset prices to plummet with Russian statements regarding withdrawing its troops from the border regions. However, oil which surged during the crisis is now down through the week.

Futures were at $92.97/barrel, 4% off Monday’s high, but hovered around $91.63/barrel

RATE OF RACE

Markets are already worried about the conflict in Ukraine, and there is a rate outlook that may hold seven Federal Reserve hikes in the next year.

James Bullard, president of the St. Louis Fed, reiterated Thursday his demand that the Fed funds rate be increased to 1% in July to fight stubbornly high inflation. Fed funds futures prices about 1/3 chance for a 50-bps increase next month.

Loretta Mester from the Cleveland Fed stated that there will be a faster pace for hikes than before.

Jan Nevruzi of NatWest Markets, a strategist said “Markets are extremely volatile and nearly everyone adjusted their Fed rise calls higher.”

“The consensus seems range between 5 (our opinion) and 7 (7 (every meeting). I think the correct number lies somewhere in-between. Nevruzi stated that it would not be surprising for there to be a hike every meeting, given the high inflation and strong growth trends.

Japan posted its fifth consecutive month of inflation on Friday. Energy prices saw their largest annual increase since 41 years ago.

In other currency markets, the dollar maintained its bid at $1.1359 per Euro and $0.7181 each.