Asian shares drop as Russia's Putin orders troops into eastern Ukraine

Shares fell sharply in Asia on Tuesday after Russian President Vladimir Putin ordered troops into separatist regions of eastern Ukraine, suggesting a long-feared invasion was possibly underway.

Tokyo's Nikkei 225 index dropped 1.8 per cent and the Hang Seng in Hong Kong fell 3.2 per cent in early trading. Oil prices jumped, with US crude up 2.8 per cent. The future for the S&P 500 dropped 1.5 per cent while the contract for the Dow industrials lost 1.3 per cent.

US markets were closed on Monday for Presidents Day.

In Europe, shares slipped Monday as investors awaited developments in the Ukraine crisis. Germany's DAX gave up 2.1 per cent. In Paris, the CAC 40 in Paris declined 2 per cent. Britain's FTSE 100 fell 0.3 per cent.

Russia's MOEX index dropped nearly 11 per cent. The ruble was down 3.2 per cent against the U.S. dollar.

Western powers fear Russia might use skirmishes in Ukraine's eastern regions as a pretext for an attack on the democracy, which has defied Moscow's attempts to pull it back into its orbit.

A vaguely worded decree signed by Putin cast the order for troops to move into eastern Ukraine as an effort to maintain peace." He also recognized the independence of the separatist regions, apparently dashing slim remaining hopes of averting a conflict that could cause massive casualties, energy shortages on the continent and economic chaos around the globe.

The White House issued an executive order to prohibit U.S. investment and trade in the separatist regions, and additional measures likely sanctions were to be announced Tuesday.

In Asian trading, the Nikkei 225 in Tokyo was down 477.52 points at 26,433.46 while Hong Kong's Hang Seng gave up nearly 793.51 points to 23,376.95. South Korea's Kospi lost 1.7per cent to 2,697.74 and the Shanghai Composite index fell 1.5per cent to 3,439.86. Australia's S&P/ASX 200 lost 1.3per cent to 7,142.60.

Russia is a major energy producer and the tensions have led to extremely volatile energy prices.

The tensions in Eastern Europe have added to uncertainty at a time when markets have been preoccupied over how the world's central banks, especially the U.S. Federal Reserve, will act to counter surging inflation while coronavirus outbreaks fueled by the highly contagious omicron variant cloud the outlook.

Indeed, a full-scale invasion of Ukraine by Russia will leave many central banks with itchy hiking trigger fingers in a quandary," Jeffrey Halley of Oanda said in a report. The immediate impact would be an exacerbation of the rampant inflationary pressures globally as oil hits USD130.00+ a barrel," he said.

Oil prices already have surged to their highest level since 2014. U.S. benchmark crude oil advanced USD2.57 to USD92.79 per barrel Tuesday in electronic trading on the New York Mercantile Exchange.

Brent crude, the basis for international pricing, added USD1.45 to USD96.84 per barrel.

On Wall Street on Friday, stocks capped a week of volatile trading with a broad sell-off.

The S&P 500 and Dow Jones Industrial Average both slipped 0.7per cent. The Nasdaq composite bore the brunt of the selling, skidding 1.2per cent. Small company stocks also fell, with the Russell 2000 index down 0.9per cent.

Treasury yields have fallen as investors shift money into the safety of U.S. bonds. The yield on the 10-year Treasury, which affects rates on mortgages and other consumer loans, sank to 1.86per cent by early Tuesday from 1.93per cent on Monday.

In currency trading, the U.S. dollar slipped to 114.72 Japanese yen from 114.74 yen late Monday. The euro fell to USD1.1308 from USD1.1312.