2022/03/07 (014) Column

WallStreet Sharply Lower Today
Oil Prices With Big Jump On Supply Woes
CHF Meanwhile Around 7-Year High Against Euro
Gold Hits 2.000 USD & Just Shy Of It`s All-Time High


Wall Street Closes Sharply Lower
All main stock market indexes in the US closed sharply lower on Monday, following four straight weeks of declines as investors continued to assess stagflation risks to the global economy. Russia’s invasion of Ukraine has clouded the growth outlook while prospects of a coordinated US and European ban on Russian oil fuelled concerns of further inflationary pressures. The Dow Jones tumbled nearly 800 points to close around 32,820 and the S&P 500 declined 3% to 4,201, falling deeper into correction territory. Meanwhile, the tech-heavy Nasdaq fell 3.6% to 12,831, more than 20% from its all-time close. Falls were again most pronounced in financial stocks, which may be the most impacted by sanctions, with American Express down 8% and US Bancorp shedding almost 4%.

Oil Prices Jump on Supply Woes
WTI crude futures jumped to above $130 per barrel on Monday, the highest since 2008, before paring gains to around $117 per barrel after US secretary of state Antony Blinken said the US and its allies are considering an embargo of Russian oil in response to the Ukraine invasion. Meanwhile, talks to restore the Iran nuclear deal were mired in uncertainty following Russia’s demand for written US guarantees that sanctions on Russia would not hurt its trade with Iran. China also reportedly made similar demands regarding its trade with Iran, complicating efforts to seal a nuclear deal.Swiss Franc Weakens against Dollar, at 7-Year High against Euro
The Swiss franc depreciated to 0.925 per USD, closing in on its lowest level in near five weeks, but was at a 7-year high against the euro, as investors sought refuge in safe-haven currencies due to the Ukraine conflict. The SNB pledged to intervene in the currency markets to curb a rise in the franc, which is a danger for Switzerland’s export-dominated economy. Sight deposit data, a proxy for the SNB’s foreign currency purchases, showed a rise of 500 million francs last week, indicating a small amount of intervention. Meanwhile, Swiss consumer price inflation rose to a higher-than-expected 2.2% in February, its highest level since 2008 but well below the 5.8% level in the Eurozone, Switzerland’s biggest export market.

Gold Hits $2,000
Gold topped $2,000 per once for the first time since August 2020, just 70 dollars shy of its record peak as geopolitical and economic uncertainties stemming from the Russia-Ukraine war lifted demand for the safe-haven metal. In the latest developments, President Vladimir Putin has vowed to press ahead with his invasion unless Kyiv surrendered, with fighting intensified over the weekend. Investors dropped equities into safer assets, while oil and other commodities extended their rallies on further supply disruptions. 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.European Shares Extend Decline
All major European bourses ended Monday’s session deep in negative territory, with the benchmark DAX 30 falling almost 2% to a 16-month low of 12,850 amid lingering fears about global economic stagflation. Prospects of a coordinated US and European ban on Russian oil fulled concerns of further inflationary pressures on economies, which, coupled with slowing eurozone growth, put the ECB policymakers in a tough spot later this week when they meet to set policy. Banks, retailers, and autos led losses, while energy and materials stocks enjoyed robust gains. Investors are now waiting for Eurozone employment and GDPdata on Tuesday before the European Central Bank monetary policy meeting and macroeconomic forecasts on Thursday.

US Treasury Yields Remain Volatile
The benchmark 10-year Treasury yield rose to as high as 1.81% on Monday, a sharp move from its daily lows of 1.67%. Market moves came on the heels of a better than expected US labour report last week and surging inflation, with headline CPI expected to accelerate 7.9% year-over-year, rising further from January’s 7.5% rise.