By John Meyer, financial consultant. Eurasia Business News, March 4, 2022
Another session of sharp decline on the European stock markets! The French stock market indexe CAC40 lost tonight nearly 5% in closing (-4.97%), back to 6,061 points, the lowest in a year. The benchmark index of the Paris stock exchange thus gives up 10% over the week while the geopolitical tension has risen after the attack on the Zaporizhzhia nuclear power plant last night in Ukraine which has just fallen into the hands of the Russians after several hours of battle and fire.
US Secretary of State Antony Blinken said this morning that NATO does not want a conflict with Russia but “will defend the territory of its members in the event of a Russian attack“: “our alliance is defensive. We don’t want conflict… But if the conflict imposes itself on us, we are ready and we will defend every inch of NATO territory.” All options remain on the table for possible new sanctions against Russia for its invasion of Ukraine, said the European Union’s High Representative for Foreign Affairs, Josep Borrell.
However, investors and industry professionnals are worried by the rising commodities prices, as Western sanctions against Russian banks and oligarchs jeopardized the supply chains of gas, oil, aluminium, titanium and rare metals like lithium and palladium. Gold prices have registered strong gains over the past two weeks (see below).
ECO AND CURRENCIES
As a sign of this strong risk aversion, bond yields are falling (they move in the opposite direction of bond prices). The yield on the 10-year T-Bond plunged 13 basis points to 1.71%, and the US “2-year”, which reflects the evolution of short rates, fell by 8 bps to 1.45%. In Europe, the German 10-year Bund, the benchmark for the euro zone, returned to negative territory (-0.104%).
Oil prices are jumping again even if they are moving a notch lower than their peak on Thursday. The barrel of US light crude (April futures) climbs 5% to $ 113 on the Nymex while the barrel of Brent from the North Sea (May futures) gains 4% to $ 114 after flirting with $ 120 yesterday.
ArcelorMittal (-8%) took the decision to stop its steel operations in Kryvyi Rih, Ukraine, in order to ensure the safety of its staff and assets. Production had already been reduced. This decision is taken at a time when the plant was operating at its technical minimum, about a third of its normal production levels. ArcelorMittal says it has assessed the situation on a daily basis before starting the process of idling all blast furnaces today. The secure process of inactivity will take between 7 and 10 days.
Over the past week, Engie, which was involved in the stillborn Nord Stream 2 gas pipeline, fell by 25.5%, and Renault, owner of the Russian car manufacturer Avtovaz, tumbled by 24.3%.
In the foreign exchange market, the US dollar continues to benefit from the resilience of US stocks and economy, in spite of 7.5% annual inflation. The dollar index (which measures its evolution against a basket of 6 reference currencies) takes 1% to 98.85 points, while the euro loses another 1.4% against the greenback at $ 1.0920, below $ 1.10 for the first time since May 2020. Bitcoin loses 4.3% over 24 hours, around $ 41,500 on Coindesk.
Read also : How to invest in gold
Gold prices have been surging since January, amid geopolitical tensions and inflation worries in Europe and the United States. On March 4, gold prices hit $ 1,964.40 per troy ounce at the closure of London marketplace today. The yellow metal has always been a great hedge against inflation because it rises in price when the cost of living standards rises.
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