Mood lifted by Ukraine-Russia talks, oil surges
Stock markets are up for a change as traders are feeling cautiously optimistic ahead of the Ukraine-Russia talks. We have seen continued violence today, but it was reported that both sides are due to take part in negotiations. It is entirely possible that noting will come of the talks, but the fact the discussions are taking place has projected a glimmer of hope. Equity markets have suffered greatly in the past few sessions, and it turn that has presented buying opportunities, but the bulls who entered the fold today are far from aggressive. The FTSE 100 is firing on all cylinders as the index is benefiting from the reports of political talks, and the booming energy sector is giving the British market an extra edge. BP and Shell are both up over 4% as the oil market is extending its recent gains.
Today’s OPEC+ meeting was the shortest on record as the group of oil producing nations rubber stamped their existing production plans. As expected, the body will lift output by 400,000 barrels per day in April. Oil was already at a lofty level prior to the Russian invasion of Ukraine, and the conflict propelled the energy higher. It stands to reason the major exporters of oil favour higher prices, but a shock to the energy market could tip the global economy into a recession. Earlier today, Brent Crude oil traded above the $110 mark, and even though it has pulled back a little, it is still up over 4%.
EUR/USD fell to a level last seen in May 2020 as the euro is coming under pressure. At the same time, there is a broad rally in the US dollar. The euro dropped to a fresh seven year low versus the Swiss franc as dealers are dumping the single currency because the currency bloc has a lot to potentially lose if the war in Eastern Europe continues – the German and Italian economies are heavily dependent on energy from Russia - so concerns circulate about the prospect of energy shortages.
Jerome Powell, the Chair of the Federal Reserve, said it would be appropriate to hike interest rates by 0.25% this month. The central banker announced it is important to move away from a very accommodative monetary policy, but at the same time he stressed the need to be nimble, especially considering the Ukraine-Russia situation.
Gold and silver are down 0.8% and 1.4% respectively as the bullish moves in stocks and the jump in the US dollar is denting the precious metals.