Daily Wrap Up 07 April 2022

7 Apr 2022 04:48 PM

Sanctions and hawkish Fed weighs on markets

Stock markets are lower due to the ongoing war in Ukraine, and the slightly hawkish tone of last night’s Federal Reserve minutes. For the past few days there has been reports that western governments will look to impose new sanctions on Russia. The EU are debating embargos on Russian energy but, they can’t just halt the total importation of energy overnight because of the heavy reliance. Brussels ban on Russian coal might not come in until mid-August, roughly one month after originally predicted.

Last night, the Fed published the minutes from the March meeting where interest rates were hiked for the first time in more than three years. It emerged the central bank might like to carry out one, or possibly two, 50 basis points rate hikes in a bid to tackle the soaring inflation. Since the meeting took place, the US unemployment rate has fallen to 3.6%, a new two year low.

The FTSE 100 is lower as the energy industry is hurting the market. Shares in oil titan, Shell, are down by 2% as the group confirmed it will take a $5 billion hit in relation to exiting its operation in Russia. Shortly after the Russian invasion of Ukraine, BP announced it would be selling of its stake in Rosneft. France’s CAC is down as political uncertainty is ticking up. One opinion poll put Marine Le Pen, the far-right politician, slightly in the lead, while a different poll put President Marcon in first place, albeit with a slim lead. The US 10-year yield hit a new three year high as the hawkish tones from the Fed minutes echo around the bond market. Worries about higher rates are hanging over US equities, and the NASDAQ 100 and the Dow Jones are down 0.6%.

This morning, the US dollar index registered a new 23 month high, but it has since retreated due to a rebound in the euro. Lately, the single currency has suffered due to the eurozone’s reliance on Russian energy, and the impending sanctions are hurting the currency.

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