Stock markets lost ground while metal prices hit record highs and oil surged on Monday after the United States raised the prospect of an embargo on Russian crude over its invasion of Ukraine — a move on which Europe urged severe caution.
European markets seesawed after a four-percent fall in Hong Kong, with Frankfurt losing two percent over the session while London and Paris kept losses in a narrower band.
Equities took a battering on Wall Street, with the broad-based S&P 500 plunging three percent by the close and the tech-heavy Nasdaq losing 3.6 percent.
“It seems the fundamental shift due to Russia’s invasion of Ukraine is that inflationary pressures will remain elevated much longer than expected and that ultimately the economy will fall into a recession at some point over the next 24 months,” Oanda’s Edward Moya said in a note.
French President Emmanuel Macron accused his Russian counterpart Vladimir Putin of hypocrisy and cynicism after Moscow announced humanitarian corridors to evacuate civilians from several Ukrainian cities, but only to Russia or Belarus.
Ukrainian President Volodymyr Zelensky meanwhile said the Russian army had scuppered the evacuations.
“It seems we could be moving to the next stage whereby countries lay down rules to not buy oil and other commodities from Russia, which in turn would reduce its funding for the war,” said Russ Mould, investment director at AJ Bell.
– Talk of oil bans –
US Secretary of State Antony Blinken had said Sunday that the White House and allies were in talks about banning oil imports from Russia.
But German Chancellor Olaf Scholz cautioned against the move, saying it could put Europe’s energy security at risk — a stance reiterated by other European leaders.
“While the US could probably get away with banning oil imports, it is clear that the case for doing so in Europe is a much harder one to make,” said Michael Hewson, chief market analyst at CMC Markets UK.
The benchmark Brent North Sea crude oil contract soared to a near 14-year high as it reached $139.13 before cooling to just over $123.
The record high stands at $147.50, achieved in 2008 during the global financial crisis.
European gas prices, meanwhile, struck record peaks on energy supply fears.
Russia is one of the world’s biggest crude producers and is also a leading supplier of natural gas.
Commodities have been red hot since Russia’s assault on its neighbor, with gold rising above $2,000 an ounce thanks to the metal’s status as a haven investment.
Aluminium, copper, nickel and palladium prices have all, soared too.
“Commodity and energy prices have inevitably been under upward pressure, with escalating sanctions against Russia and the shuttering of some Ukrainian ports driving the search for replacement supplies of crops, metals and energy,” noted Richard Hunter, head of markets at Interactive Investor.
– Stagflation worries –
Ukraine, one of the world’s top wheat producers, has set export restrictions on the crop and other agricultural products, the Interfax Ukraine news agency reported.
The move has pushed wheat prices higher as Russia is the world’s top exporter of the cereal and Ukraine is the fourth, according to official US estimates.
The surge in prices is a headache for central banks, which have already begun removing pandemic-era cash stimulus policies and are raising interest rates to curb inflation that stood at the highest levels in decades even before the invasion.
“The current backdrop is also stoking stagflation concerns, with rising inflationary pressure unlikely to be offset by sufficient global economic growth to prevent a stagnant environment,” Hunter added.
The IMF warned over the weekend that the war and sanctions on Russia would have a “severe impact” on the global economy.
– Key figures around 2200 GMT –
New York – Dow: DOWN 2.4 percent at 32,817.38 (close)
New York – S&P 500: DOWN 3.0 percent at 4,201.09 (close)
New York – Nasdaq: DOWN 3.6 percent at 12,830.96 (close)
London – FTSE 100: DOWN 0.4 percent at 6,959.48 (close)
Frankfurt – DAX: DOWN 2.0 percent at 12,834.65 (close)
Paris – CAC 40: DOWN 1.3 percent at 5,982.27 (close)
EURO STOXX 50: DOWN 1.2 percent at 3,512.22 (close)
Tokyo – Nikkei 225: DOWN 2.9 percent at 25,221.41 (close)
Hong Kong – Hang Seng Index: DOWN 3.9 percent at 21,045.21 (close)
Shanghai – Composite: DOWN 2.2 percent at 3,372.86 (close)
Brent North Sea crude: UP 4.3 percent at $123.21 per barrel
West Texas Intermediate: UP 3.2 percent at $119.40 per barrel
Euro/dollar: DOWN at $1.0858 from $1.0928 Friday
Pound/dollar: DOWN at $1.3109 from $1.3230
Euro/pound: UP at 82.79 pence from 82.60 pence
Dollar/yen: UP at 115.27 yen from 114.82 yen
