Stocks Slide and Investors Seek Safety as Ukraine Wars
Stocks fell on Friday, with European indices hitting their lowest point in nearly a year, as fighting in Ukraine intensified and government officials accused Russia of shelling Europe’s biggest nuclear power facility, causing fires. It took off which was later extinguished.
On Wall Street, the S&P 500 fell 1.1 percent, a loss that deepened even after a stronger-than-expected jobs report for February. Treasury bonds rose as investors sought safer investments; The yield on the 10-year note fell by 12 basis points to 1.72 per cent.
Shares in Europe were hit hard, with the Stokes Europe 600 falling 3.6 percent and the lowest level since March 2021. Germany’s DAX fell 4.4 percent.
Stocks have been fluctuating over the past several weeks as tensions rise in Ukraine and sanctions imposed on Russia in the days following its invasion of Ukraine have increased. Financial penalties from Western countries include freezing Russian assets worth hundreds of billions of dollars and making many forms of foreign investment into the country extremely difficult.
A range of Western companies have also moved away from Russia: Apple, Ikea and TJ Max and Marshall’s owner TJX said it has halted business operations there. Energy companies including TotalEnergies, BP and Shell have also said they will withdraw from their oil ventures with the country.
The financial impact has been most pronounced in European markets and global commodities. Germany’s DAX index broke more than 9 percent this week and is down nearly 20 percent from its early January highs. Bank of America said investors pulled $6.7 billion out of European stocks this week. It is the biggest outflow since at least 2004, when the bank began tracking the data.
Wall Street has outperformed, but the S&P 500 is headed for a weekly decline of nearly 2 percent.
The Russian Stock Exchange in Moscow remained closed for the fifth consecutive day on Friday. Russian stocks traded in other countries have fallen, and in some places trading in them has been stopped altogether. On Friday, the New York Stock Exchange said it stopped trading in three Russia-focused exchange-traded funds, including the MSCI Russia ETF.
Russia and Ukraine are important producers of many essential goods, so the escalating conflict has pushed up prices as buyers fear supply shortages. The price of Brent crude rose about 18 percent this week and was trading at around $113 a barrel on Friday; Palladium, the leading metal used in the auto industry, rose 28 percent; And wheat increased by more than 40 percent.
“Markets are caught between hammer and anvil with high inflation, impending rate hikes and rising fears of a Russia-Ukraine conflict,” said Anu Gaggar, global investment strategist at Commonwealth Financial Network. “Markets are still trying to assess the ripple effect of this conflict on the economy, which is creating more volatility.”
The release of a strong employment number for the United States on Friday wasn’t enough to stop sales. US employers added 678,000 jobs last month, the government said, a continuation of the labor market’s rapid rebound. The report also showed that the unemployment rate has fallen to 3.8 percent.
The Russo-Ukraine War and the Global Economy
The report comes as the Federal Reserve prepares to withdraw its economic support and raise interest rates this year in an effort to contain inflation. February’s jobs report also showed wage growth flattened out after a series of sharp increases, which is good news for the Fed and economists who are concerned about the start of an inflationary spiral in which wage and price hikes come together. pushes the other higher.
Between flat numbers on wage increases and uncertainty over the ripple effects of the Ukraine conflict, “there is less pressure on the Fed to front-load rate hikes,” Ms Gaggar said. Central bank chairman Jerome H Powell has said that interest rates will increase by a quarter point at the end of this month.
Federal Reserve Bank of Chicago President Charles Evans took on CNBC on Friday the outlook the Fed could move forward. Mr Evans said the jobs report “really doesn’t change anything that Chair Powell was like for the Fed the other day in pre-conditions.”
Next week, investors will be monitoring the release of the Consumer Price Index, a closely watched inflation gauge issued by the Labor Department. January exceeded analysts’ forecasts and showed prices rose 7.5 percent year over year and 0.6 percent from the previous month.
Jenna Smialek Contributed to reporting.
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