Oil up, stocks dip after short-lived Russian mutiny

SINGAPORE  – Stocks slipped slightly and oil rose in early trade on Monday as investors figured an abortive weekend mutiny by Russian mercenaries raised questions about stability and crude supply.

Brent crude futures rose 1 percent to $74.55 a barrel and U.S. crude poked above $70, recouping a little of losses made last week. Japan’s Nikkei fell 0.2 percent and Australia’s ASX 200 fell 0.3 percent.

The safe-haven yen also rose a bit, though it had help from hints at possible currency intervention from Japan’s top FX diplomat and a summary of opinions showing a central bank board member pushed for a debate on its yield curve control policy.

S&P 500 futures were 0.2 percent higher.

Russian mercenaries made a short-lived rebellion on Saturday, seizing the southern city of Rostov and advancing on Moscow demanding the removal of Russian military commanders in charge of the war in Ukraine.

The private Wagner army then withdrew after striking a deal guaranteeing their safety and the exile of their leader, Yevgeny Prigozhin, to Belarus. The consequences for the Ukraine war were not clear, though the challenge to Russian President Vladimir Putin’s authority was the starkest in decades of his leadership.

“Geopolitical risk amid internal instability in Russia has increased,” said Rystad Energy analysts Jorge Leon. “As such, we are likely to see a marginal uptick in oil prices in the coming days, if the situation does not deteriorate.”

U.S. Secretary of State Antony Blinken said the turmoil in Russia could take months to play out, while Italy’s foreign minister said it had shattered the “myth” of Russian unity.

Elsewhere markets were already on edge about a darkening growth outlook, as China’s post-pandemic recovery stalls and global interest rates remain high, and traders were unwilling to take any new positions on the basis of Russian events.

The risk-sensitive Australian dollar was steady at $0.6679. The euro nursed last week’s modest drop at $1.0906 and sterling held at $1.2728.

“I don’t think the market can get its head around working out if there are implications,” said Ray Attrill, head of foreign exchange strategy at National Australia Bank in Sydney.

“People may think that ultimately Putin’s grip on power is weakened here. Maybe the Ukrainians may be emboldened to be upping their counteroffensives,” he said, but without obvious progress traders in Asia would be focused on China.

China returns from holidays with the yuan having dropped sharply in offshore trade, leaving investors looking to the morning’s fix of the onshore trading band for signs of the central bank’s level of comfort with the slide.

The offshore yuan last traded at 7.21 per dollar.

The Japanese yen, which has been on a slide as global interest rate expectations rise and Japan’s central bank stays steadfastly dovish, bounced about 0.3 percent to 143.31 per dollar

Japan’s top currency diplomat Masato Kanda said on Monday authorities will respond to any excessive moves and did not rule out intervening, as happened last year. The Bank of Japan should also discuss revising its yield curve control policy at an early stage, a board member was quoted as saying at a June policy meeting, a summary of opinions released on Monday showed.

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