Most of the major Asian stock indices fell about 3 percent, and markets in Europe fell just as sharply in the early hours. For many indicators, this was the biggest drop since late last year, when the omicron variant of Corona Virus It raised fears of another dark phase in the pandemic.
US markets paid attention to the opening, with all major indexes down 2 percent or more. But stocks regained strength in afternoon trading after new sanctions were announced. Around 3:15 p.m., the Dow Jones Industrial Average was down 130 points, or 0.4 percent. The broader S&P 500 index fell, and rose 0.7 percent. The tech-heavy Nasdaq briefly entered a bear market before reversing and posting a 2.3 per cent rally, buoyed by bargain hunters hoping the Fed’s foray into interest rates will remain.
Although the Russian incursion has only just begun, indications on Thursday — including strikes through Ukraine — are that a large-scale military offensive would trigger severe US and European Union sanctions, harming not only the Russian economy, but the entire world. . Consumers around the world are already facing massive price increases linked to hyperinflation and turbulent energy markets, and the pains are now likely to intensify.
“The greater the conflict, the greater the impact on global energy supplies, the greater the burden on the European economy, and the greater the potential burden on US exports and consumer spending,” Bill Adams, chief economist at Comerica Bank, said Thursday in comments emailed to The Post.
The Cboe volatility index, known as Wall Street’s “fear gauge,” rose 9 percent Thursday according to the Market Watch.
Russia is a dominant source of natural gas and oil, particularly to Europe, and some of its supplies pass through a pipeline through Ukraine. The price of Brent crude, the global benchmark, rose 7.9 percent to nearly $101.50 a barrel – the first time it has been in the triple digits since 2014 – while US oil jumped 8.3 percent to $99.70.
The national average for a gallon of gasoline on Thursday was $3.54, according to AAA, up from $3.33 just a month ago. A year ago, when the epidemic was still largely waning, the national average was just $2.66.
Russia has warned that Americans will feel fully the “consequences” of the sanctions announced by President Biden earlier this week. Biden acknowledged that the crisis could lead to higher gasoline prices, while US companies were warned to prepare for potential cyberattacks. But in remarks Thursday, Biden insisted he would do “everything he can” to reduce the pain Americans feel at the gas pump, and said the United States was “prepared to respond” to cyber threats to businesses and infrastructure.
Markets hate uncertainty, and the attack arrives at a time when the economic recovery is already under siege from pandemic-related challenges in the form of a rally economic inflationmessy supply chains and a shortage of employment.
Investors usually ignore geopolitical tensions, but the crisis in Ukraine has dominated daily market machinations due to Russia’s central role in global energy markets. Russia produces about 10 percent of the world’s oil supply, on a par with the United States and Saudi Arabia, and high energy costs will spread rapidly in the global economy.
“Russia’s invasion of Ukraine added to an already tense year, with investors selling first and asking questions later,” Ryan Dettrick, chief financial market strategist at LPL, said Thursday in comments emailed to The Post. “But it is important to know that past major geopolitical events have usually been short-term market issues, especially if the economy is on solid foundations.”
Investors fled to safer assets on Thursday, sending the 10-year US Treasury yield sharply down to 1.865 percent. Bond yields move inversely with prices.
Gold – a Russian export and an investor safe haven – was trading 0.8 percent, about $1,925 an ounce. Standard prices for aluminum, nickel, and wheat and maize (other exports from Russia and Ukraine) also rose to multi-year highs.
Despite Thursday’s immediate financial reaction, no country suffered greater losses than those in Russia, whose main stock market index fell nearly 45 percent in the early hours of Thursday, hitting its lowest level since 2016. Trading was suspended Briefly amid free fall. The ruble has fallen to its weakest point in at least the past 10 years, giving Russians less spending power when they travel abroad.
Oil prices have risen more than 40 percent since December, fueled in part by speculation that Putin may launch an offensive as Russia masses forces on three sides of Ukraine.
After Russia’s invasion of Crimea in 2014, Europe’s dependence on Russian energy prevented the bloc from imposing certain sanctions that both sides suffer. But this time European leaders are likely to agree that a sharper response is needed, and they draw up plans to wean themselves off dependence on Russian oil and gas.
This includes, immediately, the suspension of the Nord Stream 2 gas pipeline between Germany and Russia. But any new energy strategy is sure to take years — and it will come at the expense of massive taxpayers. The move was praised by the United Nations and NATO allies, and was cited as part of a united response to Russia, but a senior Russian official warned Tuesday that “very soon” Germany would pay more than double for natural gas.
Last week’s analysis from Britain’s Barclays bank indicated that Europe will struggle to “replace large amounts of Russian oil and gas with alternative energy sources in other countries, especially in a short period of time.” The bank’s analysis said this could lead to rationing, raise prices and eventually reduce GDP growth.
Some of those concerns were evident in the stock market on Thursday, with Germany’s DAX closing nearly 4 percent lower and France’s CAC 40 down 3.8 percent. The benchmark Stoxx600 index closed down 3.3 percent.
The European Commission, Ursula von der Leyen, said the 27-nation bloc would meet later Thursday to discuss new sanctions. She said the measures would weaken Russia’s economic base and “ability to modernize” by freezing the country’s assets in the European Union and cutting off its access to the European financial market.
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