Stocks fall amid sharp rise in commodity prices as war rocks markets

  • The “melting” of goods continues on a par with 1915
  • European stocks plunge into correction territory
  • The euro is heading for its worst week against the dollar in nearly two years
  • Crude oil around a decade high
  • Strains appear in the money market

LONDON (Reuters) – Stocks hit one-year lows in Europe on Friday as bonds, commodities and crude oil surged as investors sought shelter in the face of an escalating war in Ukraine as Russia seized a major nuclear plant. Read more

The rout in Asian and European stocks was set to extend to Wall Street, with US stock index futures down about 0.7%.

Stokes (.stoxx) The index of 600 European companies fell 3% to 424 points, its lowest level since late March last year, leaving the benchmark index down 14% in correction territory, which means 10% or more below its highest level in January.

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Eurozone banks (.SX7E)whose exposure to Russia is closely monitored, fell by 5%.

MSCI All Country Stock Index (.MIWD00000PUS) It fell 1% to 684 points, down just over 10% for the year.

Concerns about how Russia’s invasion of Ukraine will unfold across asset classes, with a closely watched gauge of money market pressures and dollar funding conditions rising to their highest level since May 2020, reflects an increased risk of banks hoarding the greenback and thus squeezing liquidity.

Eurozone government bond yields tumbled, and the euro braced for its biggest weekly drop in seven years against the Swiss franc, dropping to levels seen in May 2020 against the dollar as investors worry that higher commodity prices will weigh on EU growth. Read more

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“It shows how volatile things are and we are not in normal times,” said Mike Kelly, head of global multi-asset at Bain Bridge Investments.

Michael Hewson, chief markets analyst, said that with a 25 basis point rate hike by the Federal Reserve later this month, all economic data such as US non-farm payrolls on Friday before the opening bell on Wall Street was Retreat back. in CMC Markets.

“You have rising inflation risks, you have great doubt about what happens next on the main front, and the Russian president who is not ruling out nuclear weapons — that is a very toxic background,” Hewson said.

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Goods “melting”

BofA said the widely tracked CRB commodity index had its strongest start in any year since 1915 amid concerns about supplies from Russia, one of the world’s largest exporters of raw materials. Read more

“We are witnessing continued ‘melting’ of commodities without any sign of slowing,” ED&F Man Capital Markets wrote in a note.

Crude oil, which reached its highest level in a decade this week, was headed for its strongest weekly gain since mid-2020, while corn hit a 10-year high, with wheat futures up 40% on the week.

Aluminum touched a record high in London and is heading for its biggest-ever weekly gain amid fears of pressure on the metal from Russia. Nickel reached an 11-year high for similar reasons.

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“People came into this situation thinking that commodities were already tired of running, but the war added a new lease on life,” said Pine Bridge’s Kelly.

“Rocket inflation is what people fear and the best hedge for that is energy and industrial minerals,” Kelly said.

On the economic data front, Friday’s US employment report is expected to show another month of strong job growth, with Omicron COVID-19’s shifting contagion wave waning significantly.

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Investors sought refuge in safe-haven US Treasuries, bringing yields on benchmark 10-year bond yields down to 1.7854%.

Oil prices have strengthened, with the market also focused on whether OPEC+ producers, including Saudi Arabia and Russia, will increase production from January.

Brent crude futures for May rose 2% to $112.59 a barrel.

Gold prices also rose on Friday, targeting their best weekly gain since May 2021. Spot gold rose 0.6% to $1,974.

MSCI’s broadest index of Asia Pacific shares, excluding Japan (MIAPJ0000PUS.) It fell as much as 1.5% to 585.6, the lowest level since November 2020, taking losses to date to 7%.

Stock markets across Asia were in a sea of ​​red, with Japan (.N225) A loss of 2.2%, South Korea 1.1%, China (.SSEC) 0.9% and Hong Kong 2.5%, while Australia is heavy commodity (.AXJO) It decreased by 0.6%.

Global Bond Fund Flows in the Week Ending March 2
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Additional reporting by Anshuman Daga, Sikat Chatterjee and Sujata Rao; Editing by Edwina Gibbs, Sam Holmes and Chizu Nomiyama

Our criteria: Thomson Reuters Trust Principles.

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