Sharp decline in sight for equities, oil soars

by Laetitia Volga

PARIS (Reuters) – The main European stock markets are expected to fall sharply at the opening on Monday as the threat of a potential ban on Russian oil imports pushes up crude prices, fueling inflationary fears.

The first indications available indicate an opening down 2.61% for the CAC 40 in Paris, 2.84% for the Dax in Frankfurt and 2.22% for the FTSE in London.

Oil prices are soaring to their highest level in nearly 14 years after US Secretary of State Antony Blinken said on Sunday that the United States and its European allies have been discussing the possibility of ban imports of Russian oil.

“If the West embargoes most of Russia’s oil, it would be a major shock to global markets,” said Ethan Harris, BofA’s chief economist, who estimates the West’s loss of five million Russian barrels could push crude up to $200 a barrel.

Added to this are uncertainties about the success of the Iranian nuclear negotiations after Moscow demanded that Washington guarantee that Western sanctions will not harm its trade with Tehran.

Soaring oil prices have investors fearing further inflationary pressure as the conflict in Ukraine threatens to weigh on economic growth.

If no important macroeconomic indicator is expected today, the consumer price figures in the United States on Thursday should be a key event this week, not to mention the monetary policy meeting of the European Central Bank (ECB).

“Given that the risk of ‘stagflation’ (low growth and high high inflation) is very real, the ECB is likely to maintain maximum flexibility on its asset purchase program until the second quarter and potentially beyond. , which effectively postpones the timing of a rate hike … when rate hikes would be needed given high inflation expectations,” said Tapas Strickland, an economist at NAB.

OIL

Brent soared 9.8% to $129.69 a barrel while US crude (West Texas Intermediate, WTI) climbed 8.8% to $125.86.

They both reached their highest level since July 2008 at 139.13 dollars and 130.50 dollars respectively.

“A boycott would put tremendous pressure on oil and gas supply which is already feeling the effects of rising demand,” said analysts at CMC Markets, who believe a $150 barrel isn’t impossible. .

AT WALL STREET

Futures contracts currently suggest an opening on Wall Street down between 1.1% and 1.59%.

On Friday, the Dow Jones fell 0.53% to 33,614.8 points, the S&P-500 lost 0.79% to 4,328.87 points and the Nasdaq Composite dropped 1.66% to 13,313.44 points.

IN ASIA

Asian markets fell sharply as the war in Ukraine shows no sign of abating.

The Nikkei on the Tokyo Stock Exchange fell 2.94% to its lowest closing level since November 2020.

In China, the CSI 300 index of large caps fell by 3.06%, the Shanghai composite index by 2.09% and the Hang Seng in Hong Kong by 3.49%.

CHANGES

The euro is at its lowest level in almost two years against the dollar as the economic outlook in the euro zone deteriorates with the conflict in Ukraine and the rise in oil.

The single European currency fell as low as $1.0820, a low since May 2020, before falling back to 1.0879, which marks a 0.43% decline against the greenback.

The latter, taking advantage of its status as a safe haven, advanced by 0.22% against a basket of international currencies.

RATE

On the bond market, the yield on ten-year Treasuries fell nearly two basis points to 1.7102%, after a two-month low at 1.668%.

METALS

Risk aversion logically benefits gold, the price of which crossed the threshold of 2,000 dollars per ounce in session for the first time since August 2021.

Industrial metal prices are also soaring, with the conflict in Ukraine and sanctions against Russia threatening to disrupt supplies.

The price of aluminum registered a record at 4,000 dollars per ton and nickel in London reached a peak since March 2008 at 34,120 dollars.

Palladium hit a record high of $3,173 earlier in the session.

NO MAJOR ECONOMIC INDICATOR ON THE AGENDA FOR MARCH 7

(Laetitia Volga, edited by Blandine Hénault)