Inflation concerns rise as oil prices fall near $105 in global markets

In closing moments of trading, the S&P 500 sank more than 2% as Apple Inc. said that it has stopped sales of the product in Russia. While closing for the second straight day, the equity gauge rebounded from the session’s low. Crude oil traded near $105 a barrel, raising fears about potentially higher inflation that could complicate the Federal Reserve’s job at a time when Russia’s invasion of Ukraine is seen as a threat to global growth. is seen as. Bonds climbed with swaps linked to the Fed’s March 16 meeting, falling as much as 22 basis points after tightening. This suggests that traders do not even expect a full quarter-point increase – unlike last month, when a half-point move was fully priced.

“Investors struggle to take long exposures as the Russia-Ukraine crisis intensifies and rising oil prices threaten economic growth prospects,” said Edward Moya, senior market analyst at Oanda. “Inflation risks have never been higher, and this should continue to fuel the many commodity supercycles that are running hot.”

Commodity prices rose the most since 2009 as Russia’s invasion of Ukraine threatens major supplies of energy, crops and metals that were already tight as major economies emerged from the pandemic. President Joe Biden is being pressured by lawmakers on both sides to cut US imports of Russian oil and gas. Such a move is likely to drive up petrol prices, adding to inflationary pressures.

Biden will deliver his State of the Union speech in Washington at 9 p.m. Not since 2003, when George W. Bush laid out his case for the war against Iraq, or 2010, when Barack Obama was facing a financial crisis, has an American leader in his annual speech to Congress at such terrifying moments. given in.

Meanwhile, Fed Chairman Jerome Powell will try to reassure lawmakers this week that the central bank will act to curb the highest inflation in four decades while remaining resilient in the face of geopolitical uncertainties. He is set to testify in a semiannual monetary-policy testimony for House and Senate panels beginning Wednesday.

More Comments:

• “The Russia/Ukraine conflict is driving up oil and other commodity prices, presenting the possibility of inflation staying high for a long time,” wrote Lindsey Bell, chief market and currency strategist at Ally.
• “We are wrestling with the news cycle, and prolonged hostilities in Ukraine will slow economic growth,” said Larry Weiss, head of equity trading at Instinet. “There are views that this slowdown will lead to less aggressive moves by the Fed.”
• Vin Thin, global head of currency strategy at Brown Brothers Harriman, wrote that given the growing uncertainty around Ukraine, a half-point hike in the Fed “will be very aggressive at this point in time.”

Russia said it would proceed with its invasion of Ukraine as the war entered a more brutal phase. EU ambassadors agreed to exclude seven Russian banks from the SWIFT financial-messaging system, but spared the country’s biggest lender Sberbank and the bank owned by Russian gas giant Gazprom.

US equities are off to another rocky start this year as prospects of higher interest rates and Russia’s invasion of Ukraine put the “stocks-only-go-up” mantra to the test. The S&P 500 saw a monthly decline. For the first time in almost a year and a half. A glimmer of hope for investors: Each of the last four times the gauge closed lower through February, it ended the year at least 9.5% higher.

What to watch this week:

• Fed Chair Jerome Powell testifies to Congress on monetary policy Wednesday and Thursday
• OPEC+ meeting, Wednesday
• Eurozone CPI, Wednesday
• Bank of Canada Rate Decision, Wednesday
• The ECB publishes the account of its February meeting, Thursday
• US unemployment, non-farm payrolls, Friday

Some of the main moves in the markets:

shares

• The S&P 500 fell 1.5% as of 4 p.m. New York time
• Nasdaq 100 dropped 1.6%
• The Dow Jones Industrial Average fell 1.8%
• MSCI World Index down 1.4%

currencies

• Bloomberg Dollar Spot Index up 0.4%
• The euro fell 0.8% to $1.1134 . came on
• The British Pound fell 0.7% to $1.3328
• The Japanese yen rose 0.2% to 114.81 per dollar

bond

• Yield on 10-year Treasuries fell 10 basis points to 1.73%
• Germany’s 10-year yield fell 21 basis points to -0.07%
• Britain’s 10-year yield fell 28 basis points to 1.13%

Goods

• West Texas Intermediate crude rose 9.5% to $104.80 a barrel
• Gold futures rose 2.6% to $1,949.70 an ounce.

This story has been published without modification in text from a wire agency feed. Only the title has been changed.