© Reuters. FILE PHOTO: A view of Horizon Singapore Terminals storage facility on Jurong Island in Singapore July 11, 2019. Image taken July 11, 2019. REUTERS/Edgar Su
By Wayne Cole
SYDNEY (Reuters) – Oil costs soared and shares sank in hectic buying and selling on Monday as the chance of a U.S. and European ban on Russian product and delays in Iranian talks triggered what was shaping up as a serious stagflationary shock for world markets.
The euro prolonged its slide, hitting parity in opposition to the protected haven Swiss franc, and commodities of all stripes had been on the rise because the Russian-Ukraine battle confirmed no signal of cooling.
Russia calls the marketing campaign it launched on Feb. 24 a “particular army operation”, saying it has no plans to occupy Ukraine.
Having surged greater than 10% in wild early motion, Brent was final quoted $7.90 increased at $126.01, whereas rose $6.67 to $122.35. [O/R]
That bounce will act as a tax on customers and the potential blow to world financial progress noticed inventory futures drop 1.5%, whereas Nasdaq futures shed 1.9%. U.S. 10-year bond yields additionally dropped to their lowest since early January.
EUROSTOXX 50 futures dived 3% and futures 2.5%.
sank 3.2%, whereas MSCI’s broadest index of Asia-Pacific shares outdoors Japan misplaced 1.6%. Chinese language blue chips shed 0.8% amid a sea of pink throughout Asian markets.
Having climbed 21% final week, was additional energised by the chance of a ban of Russian oil by the US and Europe.
“If the West cuts off most of Russia’s power exports it will be a serious shock to world markets,” mentioned BofA chief economist Ethan Harris.
He estimates the lack of Russia’s 5 million barrels might see oil costs double to $200 a barrel and decrease financial progress globally.
And it isn’t simply oil, with commodity costs having their strongest begin to any yr since 1915, says BofA. Among the many many movers final week, nickel rose 19%, aluminium 15%, zinc 12%, and 8%, whereas wheat futures surged 60% and corn 15%.
That may solely add to the worldwide inflationary pulse with U.S. client value information this week anticipated to point out annual progress at a stratospheric 7.9%, and the core measure at 6.4%.
All of which complicates the coverage image for the European Central Financial institution when it meets this week.
“Given the potential for stagflation could be very actual, the ECB is more likely to preserve most flexibility with its asset buy programme at 20 billion euros by means of Q2 and doubtlessly past, thus successfully pushing out the timing of fee hikes,” mentioned Tapas Strickland, an economist at NAB.
“Greater CPI forecasts, although, imply fee hikes will probably be wanted on the horizon.”
The near-term prospect of a extra dovish ECB mixed with safe-haven flows to drive German 10-year bond yields down an enormous 32 foundation factors final week. U.S. 10-year yields had been down at 1.69%, having already dropped 23 foundation factors final week..
Fed fund futures had been additionally gaining because the market priced in a slower tempo of fee rises from the Federal Reserve this yr, although a March hike remains to be seen as a accomplished deal.
With the outlook for European progress darkening, the one forex took a beating and fell 3% final week to its lowest since mid-2020. It was final down 0.8% at $1.0834 and in peril of testing its 2020 trough round $1.0635.
The euro was additionally tumbling in opposition to the Swiss franc to interrupt below 1.0000 for the primary time since early 2015.
The greenback was broadly firmer, supported partially by a powerful payrolls report which solely reaffirmed market expectations for a Fed hike this month. The was final at 99.134 having climbed 2.3% final week.
“Occasions within the Ukraine are more and more overwhelming the euro,” mentioned Richard Franulovich, head of FX technique a Westpac.
“With safe-haven flows more likely to proceed for someday but and Fed officers desirous to press on with their coverage normalisation plans, 100+ for (the greenback index) is only a matter of time.”
Gold benefited from its standing as one of many oldest of protected harbours and was final up 1.1% at $1,991 an oz. [GOL/]
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