Asian shares rebound but markets eye long-term Russia-Ukraine risk

A woman wearing a face mask walks past a screen displaying Hang Seng Index, in Hong Kong, China February 24, 2022. REUTERS/Tyrone Siu

SINGAPORE, Feb 25 (Reuters) – Asian markets rebounded on Friday following Wall Street’s surprising overnight reversal, as investors weighed the longer-term impact of tough Western sanctions against Russia after it

unleashed troops, tanks and missiles on Ukraine.

European stock markets looked set to follow Asia higher even as Russia pressed its attacks and global condemnation grew, with FTSE futures adding 0.78%, European futures up 2.2% and German stock market DAX futures rising 1.56%.

But U.S. share futures slipped in Asian trade, with S&P500 e-mini futures losing 0.61% and Nasdaq futures down 0.92%.

Some analysts said the sanctions by the United States, Europe and a number of other countries were not as strong as markets had feared.

While Western nations redoubled their efforts to crimp Russia’s ability to do business — freezing bank assets and cutting off state-owned enterprises — they stopped short of disconnecting Russia from the SWIFT international banking system or targeting its oil and gas exports, which some analysts said had helped markets to recover. read more

“The limits to the economic pain that the ‘West’ was prepared to tolerate to support Ukraine and punish Russia have been revealed within 24 hours of Russia’s offensive beginning,” Jeffrey Halley, senior market analyst at OANDA, said in a note.

“The Russian offensive has occurred in a time of already high inflation and commodity shortages globally, and the West has blinked immediately. The process of throwing Ukraine under the geopolitical bus has begun. Markets clearly felt the same way, that this is the worst it can get…Thereafter, the power of buy-the-dip proved irresistible.”

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was up 0.57% by midday, Shanghai’s composite index (.SSEC) was up 0.57% and Japan’s Nikkei (.N225) was up 1.27%. South Korea’s benchmark KOSPI index added 1.01%, recovering from a decline on Thursday.

Hong Kong’s Hang Seng index and Australian shares fell slightly, 0.44% and 0.03% respectively, after a strong start.

Investors rediscovered their risk appetite overnight after some initial sharp losses, with major U.S. indices posting gains, led by tech stocks.

But some analysts worry any rallies might be fleeting.

“Biden’s sanctions and reluctance to pour troops in is providing some relief. But this conflict is going to be a protracted issue and add to global inflationary pressures that will keep central banks on track for tightening,” said Kyle Rodda, analyst at IG Markets in Melbourne.

“It’s okay for now, but in the long-term the market…