Oil prices fall
Wall Street is in suspense over the Ukraine war
3/3/2022 10:34 p.m
The fact that Russian President Putin is insisting on his course in the Ukraine war is causing tension on Wall Street. A new appearance by US Federal Reserve Chairman Powell is also worrying investors.
The strong recovery from the previous day only continued on Wall Street at the start. At the end of trading, the indices were down across the board, peaking at 1.6 percent. However, the Dow Jones index was relatively resilient with a discount of only 0.3 percent to 33,795 points.
The focus continued to be on the war in Ukraine, where around a million people are said to have fled, and the issue of inflation. The only result of a second round of talks between Russian and Ukrainian delegates was an agreement on the creation of humanitarian corridors in order, among other things, to be able to evacuate civilians from war zones while Russia at the same time continued its attacks.
Meanwhile, in a phone call with French President Macron, Russian President Putin did not change his position in any way and instead threatened to make further demands. In addition, he was confident that he would achieve his goals in the Ukraine war. Macron said there was nothing in the conversation that was reassuring. Putin later said the attack on Ukraine was proceeding as planned.
The door is open for more significant rate hikes
Meanwhile, US Federal Reserve Chairman Jerome Powell, who buoyed sentiment on Wednesday by proposing just a small 25 basis point rate hike in two weeks, warned that the war is likely to boost inflation in the short term. In addition, the problems in the global supply chain would be exacerbated by the war, which would lead to further inflation problems. In doing so, he left the door open for later more significant rate hikes.
The overall mixed economic data of the day played hardly any role in price determination. That could change on Friday with the February jobs report.
Despite the prospect of higher interest rates to curb inflation, market rates eased after the previous day's sharp rise as investors favored safe havens such as bonds given the situation in Ukraine. The ten-year yield fell by almost 3 basis points to 1.85 percent.
The dollar rose sharply, the dollar index rose by 0.4 percent. The franc and the yen also benefited from their reputation as safe havens, and both were able to hold their own against the dollar. At $1.1064, the euro was last as cheap as it was in May 2020. According to Commerzbank, the euro market priced out expectations of future interest rate increases due to the war.
Cautious reversal in oil prices
The rapid increase in oil prices by more than 20 percent over the past three days has been halted. Prices fell by almost 2 percent. Above all, profit-taking is likely to have played a role on the ten-year highs that were reached. There were also reports that negotiations with Iran on reviving the nuclear agreement are making progress. Sanctions against Iran could soon be lifted and Iranian oil could come back onto the market. JP Morgan spoke of an additional one million barrels a day over the next two months.
As expected, the OPEC+ states agreed on Wednesday that they would continue to increase production volumes by 400,000 barrels a day every month, as planned, especially since the oil market is currently in good balance.
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