Global markets fall after oil reaches $130 per barrel

Futures associated with the Dow Jones Industrial Average, the S&P 500 and the Nasdaq-100 fell between 1.4% and 1.6%, indicating that US markets could fall in Monday’s trading. The Dow posted losses for the fourth consecutive week last week.

The pan-continental Stokes Europe 600 fell 2.4% on Monday. Germany’s DAX stock index and France’s CAC 40 fell into bear market territory. Rising oil and gas prices are raising concerns that an energy importer Europe dependent on Russia could slip into recession.

The war in Ukraine, now in its 12th day, has stirred commodity markets, heightened tensions between Moscow and the West, and isolated Russia from the global financial system.

Oil prices jumped 5.7% to $124.87 a barrel with global benchmark Brent crude. Earlier on Monday, it was above $130, the highest level since July 2008. The US counterpart, West Texas Intermediate, rose 5.8% to $122.46. Secretary of State Antony Blinken said on Sunday that the US and European partners are discussing sanctions on imports of Russian oil. A European gas benchmark rose 38% to a record high.

Michael Hewson, chief market analyst at CMC Markets, said rising oil prices are raising fears about demand destruction and a global slowdown. “It is now difficult to see much in the way of a significant bounce for the stock markets against the backdrop of continued growth in Ukraine”, he said.

High commodity prices and the resulting accelerated inflation are complicating the next steps of major central banks, which were largely prepared to tighten monetary policy before the war broke out. The European Central Bank is meeting this week, and investors will keep an eye on the change in its growth outlook and what it could mean for policy.

“This toxic cocktail is a big problem for central banks. Do they tighten monetary policy and risk pushing the world into a recession even faster or do they allow inflation to ripple further, which will do the same thing.” ?” Mr. Hewson said. Inflation concerns are weighing on the bond market, he said.

The yield on the benchmark 10-year Treasury bond rose 1.722% on Friday to 1.741% on Monday, reversing direction last week after posting the biggest one-week drop since March 2020. Yields increase when prices fall.

Other haven properties rallied. Gold rose 1.9% to $2,000 per troy ounce, its highest level since August 2020. The greenback strengthened with the WSJ Dollar Index rising 0.5%.

Analysts said the Russian ruble fell more than 10% against the dollar and hit a new record low of 137 rubles at $1, before some loss in market liquidity and potential signs of possible intervention by the central bank. Can be compensated According to Russia’s central bank, its stock market is closed and will remain so until at least Tuesday. It has not traded normally since February 25.

Eastern European currencies continued to come under pressure, with the Polish zloty and Hungarian forint weakening by 2% and 4% respectively against the greenback.

Shares of European banks fell further. The Euro Stokes banking subindex fell 5.9%, up from a 19% drop from the previous week. Those with substantial exposure to Russia were among the hardest hit, with Raiffeisen falling 10%, Societe Generale down 9% and ING down 7.9%. ING said on Friday that sanctions on Russia affected its debt of $700 million.

“For some banks it is about contacts between Ukraine and Russia. A second effect is increasing credit risk more broadly as the economy continues to come under pressure,” said Sebastian Galli, macro strategist at Nordea Asset Management. “

Kelvin Tai, Singapore-based regional chief investment officer for UBS, said investors appear to be in classic flight-to-safety mode and stocks are taking a hit. Too high oil prices “would act as a tax on the global economy, and therefore would really slow down global growth,” he said.

Stock benchmarks in the Asia-Pacific region fell sharply, with South Korea’s Kospi Composite down more than 2% and Japan’s Nikkei 225 down 2.9%, closing at their lowest level since November 2020. Mainland Chinese CSI 300 and Hong Kong’s Hang Seng index both fell more than 3%.