Global markets dip as oil price near $105 fuels inflation concern

Within the last moments of buying and selling, the S&P 500 sank greater than 2% as Apple Inc. stated it has halted product gross sales in Russia. The fairness gauge rebounded from session lows, whereas closing down for a second straight day. Crude traded close to $105 a barrel, elevating fears about doubtlessly greater inflation that would complicate the Federal Reserve’s job at a time when Russia’s invasion of Ukraine is seen as a menace to international progress. Bonds climbed, with swaps linked to the Fed’s March 16 assembly dwindling to 22 foundation factors of tightening. That means merchants don’t even anticipate a full quarter-point hike — a distinction from final month, when a half-point transfer was all however totally priced.

“Traders battle to go lengthy danger because the Russia-Ukraine disaster intensifies and as surging oil costs threaten financial progress prospects,” stated Edward Moya, senior market analyst at Oanda. “Stagflation dangers have by no means been better, and that ought to proceed to gasoline the various commodity tremendous cycles which can be working sizzling.”

Commodity costs soared probably the most since 2009 as Russia’s invasion of Ukraine threatens key provides of vitality, crops and metals that had been already tight as main economies emerged from the pandemic. President Joe Biden is being pressured by lawmakers in each events to chop off U.S. imports of Russian oil and gasoline. Such a transfer would probably ship gasoline costs surging, including to inflation pressures.

Biden will ship his State of the Union speech at 9 p.m. in Washington. Not since 2003, when George W. Bush laid out his case for battle in opposition to Iraq, or 2010, when Barack Obama was confronting the monetary disaster, has a U.S. chief delivered his annual deal with to Congress in such a fraught second.

Meantime, Fed Chair Jerome Powell will attempt to reassure lawmakers this week that the central financial institution will act to curb the most popular inflation in 4 a long time whereas remaining versatile within the face of geopolitical uncertainties. He’s set to testify in a semiannual monetary-policy testimony to Home and Senate panels beginning Wednesday.

Extra feedback:

• “The Russia/Ukraine battle is driving oil and different commodity costs greater, which does current the potential for inflation remaining greater for longer,” wrote Lindsey Bell, chief markets and cash strategist at Ally.
• “We’re wrestling with the information cycle, and the way extended hostilities in Ukraine would gradual financial progress,” stated Larry Weiss, head of fairness buying and selling at Instinet. “There’s ideas that this slowdown could be trigger for much less hawkish strikes by the Fed.”
• Given the heightened uncertainty surrounding Ukraine, a half-point Fed hike “would merely be too aggressive in the intervening time,” wrote Win Skinny, international head of foreign money technique at Brown Brothers Harriman.

Russia stated it might press ahead with its invasion of Ukraine because the battle enters a extra brutal stage. European Union ambassadors agreed to exclude seven Russian banks from the SWIFT financial-messaging system, however spared the nation’s greatest lender Sberbank and a financial institution part-owned by Russian gasoline big Gazprom.

U.S. equities are off to a different rocky begin this yr as prospects for greater rates of interest and Russia’s invasion of Ukraine mix to place the “stocks-only-go-up” mantra to the check. The S&P 500 noticed back-to-back month-to-month declines for the primary time in nearly a yr and a half. One ray of hope for buyers: Every of the final 4 occasions the gauge closed decrease by way of February, it completed the yr greater by at the least 9.5%.

What to observe this week:

• Fed Chair Jerome Powell testifies to Congress on financial coverage, Wednesday and Thursday
• OPEC+ assembly, Wednesday
• Eurozone CPI, Wednesday
• Financial institution of Canada charge choice, Wednesday
• ECB publishes the account of its February assembly, Thursday
• U.S. unemployment, nonfarm payrolls, Friday

A number of the primary strikes in markets:

Shares

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

Currencies

• The Bloomberg Greenback Spot Index rose 0.4%
• The euro fell 0.8% to $1.1134
• The British pound fell 0.7% to $1.3328
• The Japanese yen rose 0.2% to 114.81 per greenback

Bonds

• The yield on 10-year Treasuries declined 10 foundation factors to 1.73%
• Germany’s 10-year yield declined 21 foundation factors to -0.07%
• Britain’s 10-year yield declined 28 foundation factors to 1.13%

Commodities

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

This story has been revealed from a wire company feed with out modifications to the textual content. Solely the headline has been modified.