Stock Markets Fall, Oil Price Reaches $110

On Wall Street, stock prices fell again on Tuesday, the second consecutive day, primarily in the financial sector, as investors closely monitor the escalation of the war in Ukraine and assess how this war will impact the global economy.

The Dow Jones fell by 597 points or 1.76 percent, to 33,294 points, while the S&P 500 slid 1.55 percent, to 4,306 points, and the Nasdaq index dropped 1.59 percent, to 13,532 points.

In 10 of the 11 major sectors of the S&P 500 index, stock prices fell, with the largest decline in the financial sector, down 3.7 percent.

The only sector that increased was the energy sector, by about 1 percent, thanks to the rise in oil prices.

The pressure on the market is a result of investors’ concerns over the increasingly fierce attacks by the Russian army on Ukrainian cities. Moscow warned Kyiv residents yesterday that they should leave the city as missile strikes on the Ukrainian capital are imminent.

Investors are also fearful of disruptions after some Russian banks were barred from transactions through the global payment system SWIFT as part of Western sanctions against Russia.

Consequently, bank stocks that are most exposed to business in Russia came under pressure.

– Investors are swimming in waters of fear and do not know how to incorporate these geopolitical news into their risk and value assessment models. It is a pure emotional response from investors – says Mike Zigmont, director at Harvest Volatility Management.

Among the gainers yesterday were again the stocks of weapons manufacturers. Prices of Lockheed Martin and Northrop Grumman jumped more than 3 percent.

In the shadow of news about the war in Ukraine, good economic data about strengthening industrial activity and construction spending in the U.S. in February emerged, thanks in part to a decline in the number of coronavirus infections.

– As the growth of the U.S. economy accelerates, I expect uncertainty to subside relatively quickly, and I would not be surprised if the market finds solid footing within a few weeks when the situation becomes clearer – says Jeff Schulze, strategist at ClearBridge Investments.

The worsening geopolitical crisis has further worried investors, already concerned about high inflation and the impending increase in interest rates by the U.S. central bank.

As a result, since the beginning of the year, the S&P 500 has fallen about 10 percent, and the Nasdaq index about 13 percent.

European stock markets also saw sharp declines yesterday. The London FTSE index fell 1.72 percent, to 7,330 points, while the Frankfurt DAX plummeted 3.85 percent, to 13,904 points, and the Paris CAC dropped 3.94 percent, to 6,396 points.

Asian Markets Fall, Oil Price Reaches $110

On most Asian stock exchanges, stock prices fell on Wednesday, and the price of a barrel of oil on the London market reached $110, as investors assess how the war in Ukraine and sanctions against Russia will affect the global economy and financial system.

The MSCI Asia-Pacific index, excluding Japan, was down about 0.5 percent around 7:00 AM.

On the Tokyo Stock Exchange, the Nikkei index fell 1.6 percent, while stock prices in Shanghai and Hong Kong fell between 0.3 and 1 percent. In South Korea and Australia, however, they rose between 0.2 and 0.5 percent.

As Russian troop attacks on Ukrainian cities intensify, Western sanctions against Russia are tightening.

Investors assess how the continuation of the war in Ukraine and sanctions could impact financial markets and the global economy.

A number of large Western companies have announced suspensions or even complete exits from business in Russia.

– The Russia-Ukraine war is likely to be a dominant theme in the markets for the foreseeable future. Yesterday’s news that Russia will not pay due obligations on government bonds to foreign investors further directed investors to safer havens for capital – analysts at ING wrote in a market situation review.

The decline in stock prices on Wall Street by more than 1.5 percent also negatively impacted Asian markets yesterday.

– Investors are swimming in waters of fear and do not know how to incorporate these geopolitical news into their risk and value assessment models. It is a pure emotional response from investors,” says Mike Zigmont, director at Harvest Volatility Management.

Investors are also concerned about the risk of further inflation growth due to rising energy prices, which could prompt central banks to tighten monetary policy. This could slow down the growth of the global economy.

The dollar strengthened, oil price reached $110

Oil prices, however, jumped more than 4 percent this morning as traders fear disruptions in oil supply from Russia.

The price of a barrel on the London market rose 4.43 percent, to $109.62, and at one point reached $111.09, a new high in over seven years.

On the U.S. market, the barrel increased by 4.48 percent, to $108.04.

On the currency markets, the value of the dollar against a basket of currencies rose as investors pull back from the capital markets and invest in assets and currencies considered safer havens for capital in uncertain times.

The dollar index, which shows the value of the U.S. dollar against the other six major world currencies, is around 97.43 points, while it was 96.80 points at this time yesterday.

The exchange rate of the dollar against the Japanese currency slipped from yesterday’s 115.15 to 115.05 yen.

However, the U.S. currency strengthened against the European one, so the price of the euro slipped to $1.1115, while it was $1.1200 at this time yesterday.