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 World stocks at 1-year lows on inflation shock worries; gold shines

A broker reacts while trading at his computer terminal at a stock brokerage firm in Mumbai, India, December 11, 2018. REUTERS/Francis Mascarenhas

World stocks at 1-year lows on inflation shock worries; gold shines

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World stocks held at a one-year low on Tuesday, while gold climbed above the key $2,000 level, as the prospect of a ban on Russian oil imports pushed up oil prices and raised concerns of soaring inflation and slowing economic growth.

President Joe Biden’s administration is willing to move ahead with a U.S. ban on Russian oil imports even if European allies do not, U.S. sources indicated, while Russia warned that prices could surge to $300 a barrel and it might close the main gas pipeline to Germany if the West halts oil imports over the invasion of Ukraine. read more

International oil benchmark Brent crude , which briefly hit more than $139 a barrel in the previous session, was up about 2.6% at $126.42.

Still, with Europe rejecting plans to ban energy imports, there was some relief and European stocks picked up more than 1% in early trading, although some analysts said that may be a temporary reprieve.

Since mid-February, European banks have lost a quarter of their share value and an earnings hit looks inevitable (.SX7P).

After the S&P 500’s worst day since October 2020 (.SPX), Wall Street futures pointed to more losses.

“The price action appears to reflect building concerns over a sharper slowdown/recession for the global economy on the back of the energy price shock,” Mizuho strategists said in a note.

The MSCI world equity index (.MIWD00000PUS), which tracks shares in 50 countries, was down 0.2% and has lost 10% since early February. It was down as much as 0.5% in early Asian trading, hitting its lowest level since March 2021.

An Asian stock market gauge (.MIAPJ0000PUS) lost 1% in afternoon trade, tracking a bruising Wall Street session with Japan and Hong Kong leading losses.

“Clearly oil is in the firing line now from both sides. And there’s a little bit of brinkmanship as to who can threaten whom when it comes to oil imports or exports,” said Kyle Rodda, a market analyst at IG Australia.

Price action in the currency markets reflected increased investor nervousness with the U.S. dollar advancing against the Aussie , signalling traders were becoming increasingly pessimistic about the global growth outlook. A currency market volatility gauge (.DBCVIX) jumped to a two-year high.

U.S. crude ticked up 1.8% at $121.55 a barrel, while prices of many other commodities, including nickel, continued to rise as industrial buyers and traders scramble as the Russian-Ukraine conflict shows no sign of cooling.

UBS Global Wealth Management is recommending a neutral stance on equities and advising clients to hold commodities, energy stocks and the U.S. dollar as portfolio hedges in the short term.

The yield on benchmark 10-year Treasury notes rose to 1.8369% compared with its U.S. close of 1.749% on Monday. The two-year yield , which rises with traders’ expectations of higher Fed fund rates, touched 1.5947% compared with a U.S. close of 1.548%.

The rally in oil and other commodities prices will only add to the global inflationary pulse with data this week expected to show the U.S. Consumer Price Index climbed a stratospheric 7.9% on a year-on-year basis in February, up from 7.5% in January. read more

With the outlook for European growth darkening, the euro was up 0.1% on the day at $1.0857, after taking a beating and falling 3% last week to its lowest level since mid-2020.

The dollar index , which tracks the greenback against a basket of currencies of other major trading partners, was steady at 99.212.

Reporting by Saikat Chatterjee; Additional reporting by Sujata Rao and Julie Zhu; Editing by Susan Fenton

This article was originally published by Reuters.


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