Markets falter after attack in Ukraine; Stocks swing to win – Press Enterprise
By STAN CHOE
NEW YORK (AP) – Markets shook and faltered on Thursday after Russia’s invasion of Ukraine threatened to fuel high inflation that has been squeezing the global economy.
Initially, stocks fell as prices for oil, wheat and other commodities soared amid fears the conflict would affect global supplies. But moves slowed throughout the day, particularly after President Joe Biden said he wanted to limit economic pain for Americans and announced new sanctions that fell short of what some had suggested.
On Wall Street, the S&P 500 fell 2.6% at the open before reversing the decline to return to a 0.6% gain. Stocks in Europe suffered the worst losses after officials described the moves near Russia as a “brutal act of war”, with the German DAX down 4%.
Aside from its tragic human toll, the conflict seemed to be driving up prices at gas pumps and grocery stores around the world. Russia and Ukraine are important producers not only of energy but also of grain and various other commodities.
Oil prices on both sides of the Atlantic briefly jumped above $100 a barrel to their highest level since 2014. But they gave back much of their gains after Biden said the sanctions package was “specifically designed to allow energy payments to continue.” . While he called the sanctions severe, Ukrainian officials urged the US and the West to go further and ban Russians from a key financial payment system.
After that, US oil settled at $92.81, up 71 cents for the day but well below the $100.54 it touched earlier in the day.
Wholesale prices rose for everything from heating oil to wheat to gasoline. As with stocks, movements in Europe were stronger than in the US as the economy is more closely linked to Russia and Ukraine. The spot price in Europe for natural gas rose by more than 50%.
Rising energy and food prices could add to concerns about inflation, which hit a generation-high in the United States in January, and what the Federal Reserve will do to contain it.
It looks like the Fed will hike rates for the first time since 2018, with the only question being how quickly and how aggressively it will do so from next month.
For example, in the past, according to Goldman Sachs, the Fed has sometimes delayed major policy decisions due to uncertainty about the Kosovo war and the US invasion of Iraq. However, the bank’s economists expect the Fed to raise rates steadily at its upcoming meetings. Tensions in Ukraine likely only make it less likely that the Fed will start the process with a larger-than-normal rate hike, as some Fed officials have recently indicated.
“The Fed may be more concerned about the impact on economic growth and will likely want to tread more cautiously,” said Kristina Hooper, chief global market strategist at Invesco.
The Fed was already tasked with the delicate task of raising interest rates enough to stamp out high inflation, but not so much that the economy slipped into recession. Evercore ISI strategists said the risk is still there and has been complicated by the attack on Ukraine, but that it is “significantly greater in Europe compared to the US”.
Many investors also said that past global events, such as an invasion, had only short-term effects on the markets, lasting a few weeks or months.
Regardless, meanwhile, bond yields fell across the globe, a sign that investors were moving towards things that may offer safer returns than stocks. The US 10-year Treasury yield fell to 1.96% from 1.97% late Wednesday, although it had fallen even more earlier. Gold also continued its strong run on worries about Russia and Ukraine.
On Wall Street, worries about higher interest rates have hit big tech stocks hardest, a turnaround after those companies soared to lead Wall Street out of its coronavirus-induced 2020 slump.
The Nasdaq Composite, which is full of big tech stocks, fell as much as 3.4% on Thursday and was at one point on course to close more than 20% below its record.
But it bounced back on the day, recently up 2.4%. The Dow Jones Industrial Average fell 165 points, or 0.5%, to 32,966 at 3:23 p.m. Eastern Time.
The FTSE 100 in London fell 3.9% after Europe woke to news of explosions in Ukraine’s capital Kiev, the metropolitan city of Kharkiv and other areas. The CAC 40 in Paris lost 3.8%.
The Moscow Stock Exchange briefly suspended trading on all of its markets on Thursday morning. After trading resumed, Russian indices plunged by a third or more.
“How bad could that get? Well, how long is a piece of string, right?” said Jonas Goltermann, senior global markets economist at Capital Economics. “There aren’t many obvious examples of this type of market shock.”
___
AP business writers Damian J. Troise, Kelvin Chan, Christopher Rugaber and Joe McDonald contributed.
.