By Swann Collins, investor, writer and consultant in international affairs. Eurasia Business news, March 7, 2022
European stock markets ended lower on Monday and Wall Street was trading in the red at mid-session, as the prospect of a possible ban on oil imports from Russia led to a new surge in oil prices and raised concerns about inflation and a slowdown in economic growth. Gas prices also hit records, reaching $ 3,898 per thousand cubic meter, while on Friday trading ended at $ 2150.
In Paris, the French stock market index CAC 40 ended down 1.31% to 5,982.27 points. The British Footsie fell by 0.4% and the German Dax by 1.98%.
The EuroStoxx 50 index lost 1.23%, the FTSEurofirst 300 index fell by 1.01% and the Stoxx 600 lost 1.1%.
Antony Blinken, the US secretary of state, said on Sunday that the United States and the European Union were considering banning imports of Russian oil.
According to two sources familiar with the matter, the Biden administration is ready to decide without its European allies on this ban.
At the close of trading in Europe, Brent was trading at $123.04 a barrel after climbing to $139.13, while U.S. light crude (West Texas Intermediate, WTI) was trading at $118.41 after touching $130.50, with both oil benchmarks at a peak since July 2008.
Soaring commodity prices are fueling the risk of a sustained inflationary surge and, at the same time, Western sanctions against Russia are likely to affect global economic growth as the Russian offensive does not weaken on the 12th day of fighting in Ukraine.
VALUES IN EUROPE
In Europe, on a sectoral level, the oil and gas segment (+4.27%) recorded by far the best performance of the Stoxx 600. Mining stocks (+0.19%) also rose on the back of higher metal prices.
French oil major TotalEnergies advanced by 0.87%, Shell by 8.05% and BP by 3.85%, amid surging oil prices.
TotalEnergies does not feel any political pressure from the French government to leave Russia after the invasion of Ukraine, CEO Patrick Pouyanné said Monday.
In contrast, the retail (-2.62%), automotive (-3.97%) and banking (-3.25%) sectors recorded the largest declines, since high inflation may drive consumers away from stores and risky banking credit (even if inflation can help payback a mortgage).
French banks BNP Paribas, Crédit Agricole and Societe Generale, which have been at a stock market low since the beginning of 2021, fell from 2.35% to 4.20%. The two latest are exposed in the Russian market. Their European competitors UniCredit, Deutsche Bank and Commerzbank lost from 2.77% to 5.59%, the sector being penalized by the Ukrainian conflict and sanctions from Western countries aimed at freezing the Russian economy and finance. Russia could retaliate taking measures against European banks.
Read also : Wall Street : the Dow and Nasdaq are falling, oil prices are soaring
Stocks price of the European defense groups such as BAE Systems (+7.11%), Rheinmetall (+4.44%) and Thales (+6.64%), which have gained from 22% to 54% since February 24, when Russia sent troops to Ukraine in the morning, was still growing today, as Germany announced its plan to rearm, with a € 100 billion budget.
At the exchange rate, the US dollar appreciated, by 0.53%, against a basket of reference currencies, taking advantage of its status as a safe haven currency against a backdrop of concern about inflation and risk for the global economy.
The euro, down 0.58%, was trading at $1.0862 after falling to $1.0804, the lowest since May 2020.
The Russian ruble, which has lost more than 40% of its value against the dollar since the beginning of the year, is tumbling again, to a low against the dollar in offshore trading, with the Russian stock exchange still closed until at least Wednesday.
One dollar was worth 139 rubles today, March 7 at 04:00 p.m. EST.
In the bond market, yields are rising after falling sharply on Friday as the U.S. Federal Reserve is scheduled to meet on March 16, while the European Central Bank (ECB) is due to issue its monetary policy statement on Thursday. Experts think that the ECB would have to wait until the fourth quarter 2022 to raise rates despite high inflation.
The yield on ten-year U.S. Treasuries rose 2.9 points to 1.7529% after a low since Jan. 5 at 1.668%.
Its German equivalent of the same maturity ended up nine points to -0.008%, while the French ten-year OAT advanced six points to 0.478%.
The yield on ten-year Chinese Treasuries was 2.813 % pa on March 4.
In a context of strong risk aversion and high inflation in Europe (+5.8%) and in the US (+7.5%), gold prices crossed $2,000 per troy ounce in session before returning to $1,999 at the close of trading in Europe.
Palladium, for its part, hit an all-time high of $3,499 an ounce, while nickel jumped 88.4 percent, with metals supported by the Russian-Ukrainian conflict. Russia is the largest exporter of Palladium in the world and also supplies large amount of nickel.
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. On March 7, in the morning, gold prices crossed $ 2,000 per troy ounce, hitting $ 2,039 per troy, a record since August 2020.
Gold is a good asset in tough times. In almost any crisis, it shows growth. 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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