Wall Street falls, oil prices jump on Ukraine conflict concerns

A sign for Wall Street is seen in the financial district of New York, U.S., November 8, 2021. REUTERS/Brendan McDermid/File Photo

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NEW YORK/WASHINGTON, Feb 11 (Reuters) – Global stocks fell on Friday on growing concerns over escalating tensions between Ukraine and Russia and the prospect of a tighter rate hike schedule. interest of the US Federal Reserve in response to high inflation for decades.

Benchmark Treasury yields lost ground and German bond yields fell from 2018 highs reached on Thursday. Gold and oil prices rose.

Losses deepened in volatile Wall Street trading after Washington said Russia had massed enough troops near Ukraine to launch a major invasion, and urged US citizens to leave the country within 48 hours after Moscow toughened its response to Western diplomacy. Read more

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Rising oil prices sent energy shares up more than 2.8% (.SPNY), although most of the 11 major S&P 500 sector indices fell, led by technology (.SPLRCT) and Consumer Discretionary (.SPLRCD).

The Dow Jones Industrial Average (.DJI) ended down 503.53 points, or 1.43%, at 34,738.06; the S&P 500 (.SPX) lost 85.44 points, or 1.90%, to 4,418.64; and the Nasdaq Composite (.IXIC) fell 394.49 points, or 2.78%, to 13,791.15.

“By pushing energy prices even higher, a Russian invasion would likely exacerbate inflation and increase pressure on the Fed to raise interest rates,” said Bill Adams, chief economist at the Fed. Comerica Bank.

“From the Fed’s perspective, the inflationary effects of a Russian invasion and rising energy prices would likely outweigh the negative implications of the shock for global growth.”

Markets were already reeling from a Labor Department report on Thursday showing U.S. inflation at its highest level in four decades, stoking fears that the Fed could start raising key interest rates more aggressively than many had not expected it. Read more

Those concerns were heightened after St. Louis Federal Reserve Chairman James Bullard told Bloomberg he wants a full percentage point hike in interest rates in the next three policy meetings of the Federal Reserve. central bank. Read more

Financial markets are fully pricing in a rate hike of at least 25 basis points by the Fed at its March 15-16 policy meeting and are pricing in a 71.5% chance of a 50 basis point hike, according to CME Group’s FedWatch tool.

“We really won’t know what the Fed is going to do until that happens,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. “There’s a lot more data by the next Fed meeting that they can access.”

“It’s unlikely the Fed won’t act, but I still believe we’ll see signs of inflation moderating by the time the Fed meets and a 25 basis point hike is the decision. most likely,” Ghriskey added.

Interest-rate-sensitive tech stocks weighed on European equities, with high US inflation raising the odds of a more aggressive Fed.

The pan-European STOXX 600 index (.STOXX) closed down 0.6%, but gained 1.6% this week, its best performance since late December.

The MSCI World Equity Index (.MIWD00000PUS), which tracks stocks from 49 countries, fell 10.85 points, or 1.49%, to 715.46. Emerging market stocks (.MSCIEF) fell 0.85%.

MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) closed down 0.73%, while the Japanese Nikkei (.N225) rose 0.42%.

US Treasury yields fell on Friday, with the benchmark 10-year yield dipping below 2% as geopolitical worries stifled risk appetite, a day after rising sharply on strong inflation data.

The dollar index was up 0.288% at 4:18 p.m. EST.

The Japanese yen strengthened 0.60% against the greenback to 115.31 to the dollar, while the pound last traded at $1.3547, down 0.06% on the day.

The euro weakened 0.77%, following a warning from European Central Bank President Christine Lagarde that raising interest rates would only hurt the economy. Read more

Oil prices ended up climbing 3% to seven-year highs as growing fears of an invasion of Ukraine by Russia, a major energy producer, added to concerns over the global crude oil supply.

Brent crude futures settled $3.03, or 3.3%, at $94.44 a barrel, while U.S. West Texas Intermediate crude rose $3.22, or 3, 6%, to $93.10 a barrel.

US gold futures stabilized 0.3% at $1,842.10, on inflation fears and escalating tensions between Russia and Ukraine.

Spot gold prices rose $36.0077 or 1.97% to $1,862.58 an ounce.

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Reporting by Stephen Culp and Chris Prentice; Additional reporting by Elizabeth Howcroft in London and Bansari Mayur Kamdar in Bangalore; Editing by Andrea Ricci, Louise Heavens and Richard Chang

Our standards: The Thomson Reuters Trust Principles.

Steve R. Hansen