Oil leads commodity costs as global stocks fall

A view of the Horizon Singapore Terminals storage facility on Jurong Island in Singapore
FILE PHOTO: A view of Horizon Singapore Terminals warehouse on Jurong Island in Singapore, July 11, 2019. Picture taken July 11, 2019. REUTERS/Edgar Su

March 7, 2022

By Lawrence White and Elizabeth Dilts Marshall

NEW YORK (Reuters) – Oil and other commodity prices rose while global stocks fell on Monday as risks of a US and European ban on Russian crude imports threatened supply chains and added further inflationary pressures to economies around the world.

Brent, the international benchmark, briefly topped $139 a barrel, its highest level since 2008. Nickel is up 30%, gold broke $2,000 an ounce and wheat jumped to a 14-year high as industrial buyers and traders weighed in endeavored to source raw materials affected by supply disruptions resulting from the Russian invasion of Ukraine.

Eurozone real government bond yields fell sharply on surging energy prices, even before talks of a Russian oil ban raised concerns that the global economy is at risk of stagflation, with prices rising even if growth is flat.

Germany 10-year and 30-year inflation-linked government bond yields fell as much as 16 basis points (bps) to hit new record lows of -2.531% and -2.407%.

US Secretary of State Antony Blinken said Sunday the United States and European allies are considering a ban on Russian oil imports, while the White House coordinated with congressional committees to move forward with a US ban.

The news put pressure on US and European equity markets, sending the MSCI index of global equities down 1.45%.

“If the West halts most of Russia’s energy exports, it would be a huge shock to global markets,” said BofA chief economist Ethan Harris.

The Dow Jones Industrial Average fell 349.45 points, or 1.04%, the S&P 500 lost 49.72 points, or 1.15%, and the Nasdaq Composite fell 195.51 points, or 1.47%. The pan-European STOXX 600 index was last down 0.60% after recovering from a one-year low earlier in the trading session.

Germany’s DAX appeared to confirm a bear market after suffering a 20% decline from its January high.

Emerging market equities lost 3.00%. MSCI’s broadest index of Asia-Pacific stocks outside of Japan closed 2.89% lower, while Japan’s Nikkei lost 2.94%.

Brent was last at $122.78, up 3.95% on the day. U.S. crude recently rose 2.59% to $118.68 a barrel. [O/R]


BofA’s Harris estimates that the loss of 5 million barrels in Russia could cause crude oil prices to double to $200 a barrel.

The conflict between Russia and Ukraine also strained talks to revive Iran’s nuclear deal with major powers after Tehran accused Russia of “meddling”.

That complicates the political picture for the European Central Bank when it meets this week. A majority of economists polled by Reuters said the EU central bank will likely wait until the latter months of this year for its first rate hike in over a decade.

“Given that the potential for stagflation is very real, the ECB’s €20 billion asset purchase program is likely to maintain maximum flexibility through Q2 and possibly beyond, effectively timing rate hikes postpone,” said economist Tapas Strickland at NAB.

In the United States, investors are closely watching the CPI report, which is due out on Thursday. Data should show that the US core CPI for February rose 6.4% yoy from 6% in January.

A hotter reading is likely to seal a Federal Reserve rate hike later this month.

Traders now see a 99% chance of a 25 basis point rate hike by the Fed at its March meeting, versus a 1% chance of unchanged rates.


As prospects for European growth dimmed, the single currency suffered another 0.49% drop to $1.0872.

The euro also plummeted against the Swiss franc, breaking below 1.0000 for the first time since early 2015. This prompted a rare verbal intervention from the Swiss central bank, which reiterated its pledge to intervene in FX markets to stem franc strength if necessary.

The dollar index rose 0.182, helped in part by a strong payroll report that helped it rise 2.3% last week.

(Reporting by Lawrence White in London and Elizabeth Dilts Marshall in New York; additional reporting by Wayne Cole in Sydney; editing by Sam Holmes, Catherine Evans and Lisa Shumaker) Oil leads commodity costs as global stocks fall

Caroline Bleakley

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