2022/03/08 (015) Column

Gold Firms Near Record
Oil Climbs On Russia Crude Ban
US Stocks Close Volatile Session Lower
Americans Are the Most Pessimistic since 2013


Gold Firms Near Record
Gold surged to as high as $2,066 an ounce on Tuesday, just 9 dollars shy of its record peak hit in August 2020 as geopolitical and economic uncertainties stemming from the Russia-Ukraine war lifted demand for the safe-haven metal. In the latest developments, the US announced a ban on imports of Russian oil, a move that threatened supply chains and heaped further inflationary pressure on economies worldwide. Soaring commodities prices fuelled fears of stagflation for the global economy, bolstering the metal’s appeal as an inflation hedge. On the flip side, the prospect of sharply higher interest rates should keep a lid on prices, with Chair Jerome Powell strongly backing the case for a 25bp rate rise on March 16.

Brent Crude Climbs on Russia Crude Ban
Brent crude futures rose 2% to near $127 per barrel on Tuesday, having jumped almost 8% earlier in the session after US President Biden announced a ban on the imports of Russian oil, gas and energy into the US as part of economic penalties for Russia’s invasion of Ukraine. Also, the UK is to phase out the import of Russian oil and oil products by the end of 2022. The ban would cut America’s annual supply of oil and refined products by 8%, with crude falling 3%. In Britain, the move is seen dragging down overall oil supply by 8% and diesel by 18%. Russia is the world’s third-largest oil producer, accounting for more than 10% of global supply, according to US EIA. Its exports account for 7% of the world market, of which around 60% go to Europe, making the continent more reluctant in joining the US and UK. Exxon Mobil Corp., BP PLC and Shell PLC all announced plans to exit Russian operations last week.

US Stocks Close Volatile Session Lower
US stocks closed a choppy session lower on Tuesday, extending yesterday’s sharp decline, as the Russian invasion of Ukraine and consequent rise in commodity prices fuelled concerns of a slowdown in global economic growth. The main Wall Street indices fell after US President Biden announced a ban on imports of Russian oil, a move that threatens supply chains and strengthens further inflationary pressure on economies worldwide. After giving up a 585 point gain in the session, the Dow Jones closed 185 points lower at 32,632, while the S&P 500 and the tech-heavy Nasdaq fell 0.7% and 0.3%, respectively. Soaring crude oil prices lifted energy shares, with Chevron (5.1%) booking significant gains. Higher crude prices also carried the renewable energy sector, led by Enphase Energy (10.8%) and SunPower (18.7%).

Americans Are the Most Pessimistic since 2013
The IBD/TIPP Economic Optimism Index in the US fell to 41 in March of 2022, the lowest since October 2013, as the Russia’s invasion of Ukraine sent oil prices higher and the stock market sharply lower. The six-month economic outlook index for the US fell 5 points to 33.9 and the personal finances subindex slid 4.1 points to 47.3, both at the lowest levels since August 2011. The gauge of support for federal economic policies edged up two-tenths of a point to 41.9.Canadian Dollar Weakens to 11-Week Low
The Canadian dollar weakened to 1.29 per USD in the second week of March, the lowest in 11 weeks, as concerns of lower growth and higher prices continued to pressure risk sensitive currencies, despite higher oil prices, Canada’s main export. Crude oil prices continued to rise after Washington announced a ban on Russian oil, gas, and energy, while the UK is set to phase out Russian energy imports by the end of the year in retaliation to Russia’s invasion of Ukraine. The supply shock of fossil fuels and commodities due to Russia’s assault heightened inflation fears in Canada, despite recent rate hikes by the Bank of Canada. The central bank increased its target for the overnight rate by 25bps to 0.5% in its March meeting, the first hike since October 2018, retreating it will use its monetary policy tools to return inflation to the 2% target.