Oil prices inched higher on Monday as concerns over Russian stability and crude supply emerged following an unsuccessful mutiny attempt by Russian mercenaries over the weekend.
However, investors remained cautious and refrained from drawing further conclusions at this point.
Brent crude futures experienced a modest increase of 0.2%, reaching $74.02 per barrel after briefly reaching $74.80.
Concurrently, the Russian rouble depreciated to a 15-month low in early Moscow trading.
The Asia-Pacific shares, excluding Japan, slid to a three-week low due to minor declines in China, Taiwan, and Australia, which offset marginal gains in South Korea. Japan’s Nikkei index eased by 0.1%.
Meanwhile, the battered yen showed a slight rebound in response to hints of potential government intervention aimed at supporting the currency. Furthermore, the summary of a central bank board meeting revealed a call for an early revision of yield curve control.
Looking towards Europe, futures indicated a positive trend, with European futures gaining 0.3%, S&P 500 futures rising by 0.2%, and FTSE futures adding 0.1%.
The failed mutiny by Russian mercenaries unfolded on Saturday when they briefly seized the southern city of Rostov and advanced towards Moscow, demanding the removal of Russian military commanders involved in the Ukraine conflict.
Following negotiations, the private Wagner army withdrew after securing a deal ensuring their safety and the passage of their leader, Yevgeny Prigozhin, to Belarus.
The implications of this incident for the ongoing Ukraine war remained uncertain, but the challenge to President Vladimir Putin’s authority marked one of the most significant events during his leadership.
Ray Attrill, head of foreign exchange strategy at National Australia Bank in Sydney, noted that the market struggled to assess the potential implications of the mutiny.
Analysts at RBC Capital Markets expressed concern about the possibility of martial law in Russia and its potential impact on the workforce at ports and oil production facilities.
The failed mutiny and its aftermath contributed to amplified global geopolitical risks, underscoring existing vulnerabilities within Russia.
While Asia focused on these developments, investors also paid attention to signs of a slowdown in China’s economic recovery.
Weaker-than-expected travel figures during a recent holiday period raised concerns, prompting S&P Global to revise its 2023 GDP growth forecast for China, aligning with other Wall Street banks that adjusted their estimates accordingly. Consequently, blue-chip stocks in Shanghai fell by 0.7%.
In the currency market, the Australian dollar remained stable at $0.6683, while the euro and sterling experienced marginal fluctuations at $1.0903 and $1.2730, respectively.
The Japanese yen, which has witnessed a significant depreciation this year due to rising global interest rate expectations and the dovish stance of Japan’s central bank, rebounded by up to 0.3% against the dollar.
This was partly due to speculation surrounding potential intervention or policy shifts. In this context, Japan’s top currency diplomat, Masato Kanda, adopted a tougher tone, describing recent yen movements as “rapid and one-sided,” which could indicate a forthcoming intervention to purchase yen.
Aside from geopolitical developments, concerns surrounding food prices and competition surfaced in Sweden.
The country’s competition authority expressed apprehension about the profit margins charged by supermarkets and wholesalers. They initiated an investigation into possible profiteering, particularly in a year that witnessed the highest food price increases among Nordic countries.
Food inflation has been a key driver of the cost-of-living crisis in several European nations, leading some governments to impose price caps on specific food items to alleviate the burden on struggling consumers.
As a response, France’s major food companies pledged to reduce prices on hundreds of products starting from the following month, backed by the threat of financial sanctions.
In conclusion, the failed mutiny by Russian mercenaries and the subsequent concerns over stability and crude supply have introduced new uncertainties in the global market.
Geopolitical risks have been amplified, prompting cautious reactions from investors.