Stocks drop amid economic worries as oil surges
BNN Bloomberg
A surge in oil sent shivers through risky assets Tuesday, reversing an early recovery in American stocks and sending some European markets down 4 per cent.
A surge in oil sent shivers through risky assets Tuesday, reversing an early recovery in American stocks and sending some European markets down 4 per cent. Bonds rallied amid concern about the impact of war on global economies, with 10-year U.S. yields posting their worst four-day drop since December.
Equities pushed lower as a jump in crude raised fears about higher inflation that could complicate the Federal Reserve’s job at a time when Russia’s invasion of Ukraine is seen as a potential threat to the economic recovery. Bonds climbed across the curve, led by short-dated tenors, with swaps linked to the Fed’s March 16 meeting pricing in about 25 basis points of tightening. Oil soared even as the U.S. and other major economies agreed on a coordinated release of stockpiles.
Fed Chair Jerome Powell will try to reassure lawmakers this week that the central bank will act to curb the hottest inflation in four decades while remaining flexible in the face of geopolitical uncertainties. Powell -- in a semiannual monetary-policy testimony to House and Senate panels starting Wednesday -- is likely to signal the Fed will go ahead with plans for raising rates in March.
Comments:
Given the heightened uncertainty surrounding Ukraine, a half-point Fed hike “would simply be too aggressive at the moment,” wrote Win Thin, global head of currency strategy at Brown Brothers Harriman.
As penalties against Russia continued, the European Union identified seven Russian banks it’s considering excluding from the SWIFT messaging system. The nation banned residents from transferring hard currency abroad as President Vladimir Putin sought to counter the fresh sanctions walloping the economy. The European Union and Switzerland approved measures against some of Russia’s wealthiest tycoons, and Britain told ports not to service Russian-flagged vessels.
