Uncertainty will hit Wall Street, oil will rise after Russian sanctions

NEW YORK – Markets trembled on Monday amid unrest over how high oil prices will be and how much the world economy will suffer after the United States and its allies stepped up financial pressure on Russia over its invasion of Ukraine.

Stocks rolled up and down several times, leaving major indexes ambiguous. Investors rushed to the bond in search of security, sharply reducing yields, and the value of the Russian ruble fell to a record low.

The S&P 500, which fell 1.6 percent, recouped most of the losses and ended 0.2 percent lower. The Dow Jones industrial average fell 0.5 percent and the Nasdaq rose 0.4 percent after returning from a 1.1 percent drop.

Unstable trading followed a move by Western allies last weekend to block some Russian banks from a key global payment system. The US Treasury Department has also announced new and powerful sanctions against Russia’s central bank.

The Biden administration said Germany, France, Britain, Italy, Japan, the European Union and others would join the United States in striking the Russian Central Bank, which said the Moscow Stock Exchange would remain closed on Monday.

Shares on Wall Street cut their losses by morning, at one point turning into modest growth, after rising major tech stocks and others that benefited most from low interest rates. The war in Ukraine raises expectations that the Federal Reserve may have to raise interest rates more slowly to fight inflation.

Other markets have shown greater fear of growing antagonism between Russia and the United States and their allies.

Oil prices on both sides of the Atlantic have risen more than 3 percent amid concerns about what will happen to oil supplies because Russia is one of the world’s largest energy producers. This increases the pressure on the already high inflation that is squeezing households around the world.

In search of safer profits, investors invaded U.S. government bonds, reducing the 10-year Treasury’s yield by about 0.15 percentage points to 1.83 percent, the biggest drop since the Omicron coronavirus variant first shocked investors. . Gold rose by 0.7 percent.

The appeals are just the latest sharp fluctuations in the markets, which relaxed with relief only on Friday, partly due to the view that sanctions against Russia are not as harsh as they could be. In the coming hours and days, sharper turns are possible, given the uncertainty of the war.

“Now the situation is changing and investors are looking for the next shoe,” said Barry Bennister, Stifel’s chief capital strategist.

Pressure on Russia comes not only from governments. London-based energy giant BP said on Sunday it would drop its investment in Rosneft, a Russian energy company. BP has owned a nearly 20 percent stake in Rosneft since 2013, and its shares listed in London have fallen 3.9 percent.

The S&P 500 fell 10.71 points to 4,373.94. The Dow, which fell 589 points, ended 166.15 points to 33,892.60. The Nasdaq rose 56.77 points to 13,751.40.

The Russell 2000 small stock index also bounced back from an early slide, adding 7.16 points, or 0.4 percent, to 2,048.09.

Markets were already strained before Russia’s invasion, worried about a future increase in interest rates by the Federal Reserve, which will be the first since 2018.

Fed Chairman Jerome Powell is scheduled to testify in Congress later this week, where he may offer clues as to the path of interest rates. Friday’s report will also show whether the U.S. labor market remained strong in February, which would give the Fed more freedom to raise rates.

“This situation raises the issue of inflation to a small point,” said Greg Basuk, CEO of AXS Investments. “Eyes will be on Powell to see the extent to which the Fed believes these geopolitical developments could affect their timing and prolong rate hikes.”

The Fed has fallen on a narrow rope, and it needs to raise rates enough to stifle high inflation, but not enough to stifle the economy into recession. Higher rates also put downward pressure on all types of investments from stocks to cryptocurrencies.

Given the uncertainty surrounding Ukraine, investors have sharply reduced rates on what the Fed will raise rates in March twice as much as usual. Currently, traders predict only a 10.4 percent probability of this, according to the CME Group. The day before, they set prices with a probability of 24 percent.

“As a result of this crisis, central banks are expected to take a slower and more cautious approach, so that this will provide positive compensation for risky assets,” said Jonas Golterman, senior economist in global markets at Capital Economics. briefing Monday.

Energy shares in the S&P 500 jumped 2.6 percent. Defense-related companies also grew, Lockheed Martin rose 6.7 percent.

Financial analysts argue that wars and other such terrible geopolitical events tend to have only a temporary impact on markets, which can last weeks or months. But at the moment the fear is still greater.

Putin’s order to defend Russia’s nuclear weapons increased preparedness has heightened tensions with Europe and the United States and revived the dormant fears of the Cold War era.

Russia’s central bank has raised the key rate to 20 percent from 9.5 percent in a desperate attempt to support the collapse of the ruble and prevent a raid on banks. The Russian currency fell below 0.9 cents at one point and then rose again above the penny, although it still fell by almost 15 percent.

The ruble fell more than 30 percent after Russian banks blocked the SWIFT payment system. Among other things, the sanctions are designed to limit Russia’s central bank’s access to more than $ 600 billion in reserves and hamper its ability to support the ruble.

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