Equities fall again, oil booms
Equity markets saw a lot of back and forth today as volatility remains very high. This morning, stock markets in Europe were firmly in the red as the news that governments around the world were considering an energy ban on Russia. Oil rocketed to a 14 year high as a result, and that hammered equities as shocks to the oil market often pave the way for recessions. Earlier on, the DAX traded below the 12,500 mark and at that point it had declined 23% from its all-time high in January. European stock markets are on track to close lower on the day, but they are comfortably off the lows of the session.
In the last hour, it was announced that representatives from the Russian and Ukrainian governments have entered talks. So far, the discussion has not come to much, but the very fact they are talking is viewed favourably. Anthony Blinken, the US secretary of state, reiterated the stance his government does not want the conflict to widen, in addition to that, Mr Blinken stressed they will not be implementing a no-fly zone, traders construed this as a sign that Western administrations are not willing to get directly involved in the conflict.
The US is geographically and economically separated from the Ukraine-Russia situation, so the moves seen on Wall Street are not as aggressive. The Dow Jones is down over 1% but its daily range is relatively small when compared with European indices. America was already battling high inflation prior to the crisis, so the surge in oil and natural gas prices is likely to nudge up CPI. Next week, the Federal Reserve will announce its interest rate decision. It is widely speculated that rates will be lifted by 0.25%, but in light of the war in Eastern Europe, the central bank might rein in its previously hawkish forecasts.
WTI and Brent crude oil registered 14-year highs today following on from the news the countries might look to impose a ban on purchasing energy from Russia. The oil contracts have retreated throughout the session as dealers realise that a full-scale ban would be tough to implement. If actions are taken in this regard, it is likely to be a staggered approach to cutting back on energy from Russia. Brent crude is up over 4%.
Metals also saw a lot of volatility today, as gold briefly traded above $2,000 – hit a 17-month high – but the some of the fear in the markets subsided, that took the shine off gold. Palladium jumped to a new record high before falling below the $3000 mark, is now fractionally lower on the day.