European stocks have closed lower for the second day in a row.
Chris Beauchamp, chief market analyst at online trading platform IG, said:
Screens across global markets have turned red again, as market sentiment shifts back towards risk aversion, due to the worsening situation in Ukraine.
While the start to the day was rather shaky, there had been hopes that equities might continue to push higher even with the difficult backdrop of the war in Ukraine. But those hopes have evaporated. Previously strong sectors such as banking are beginning to feel the pressure as investors reassess the outlook both for global GDP and tighter monetary policy, the latter exemplified by a pushing back of expectations around the first European Central Bank rate hike.
European markets continue to be the most affected, from a combination of closeness to Russia (both geographically and economically) and by the weaker earnings outlook here compared to the US. Kremlin pronouncements have become more strident today, further reducing the attractiveness of the continent’s equities.
Thank you for reading. We’ll be back tomorrow – JK
Ministers from International Energy Agency member states are pondering the release of 60m barrels from oil reserves, to bring crude oil prices down, Reuters is reporting, citing two sources.
The US energy secretary Jennifer Granholm is chairing an extraordinary ministerial meeting of the Paris-based IEA, which represents 30 nations and has coordinated three emergency oil stock releases in the past. It was founded in 1974 as an energy watchdog.
Brent crude is now trading at $104.25 a barrel, a $6.25 increase on the day. Any disruption from Russia, which has so far kept oil flowing to the west and exports around 4-5m barrels a day, could send prices even higher.
Andrew Hunter, senior US economist at Capital Economics, said:
The war in Ukraine will prevent US inflation from falling as much as it otherwise would have in the coming months, but it will have little impact on the real economy, so we doubt it will stop the Fed.
Here is our full story on the equivalent factory survey for Britain. UK manufacturers are facing a sharp rise in costs as the Russian invasion of Ukraine undermines the progress made towards fixing global supply chains before the conflict broke out, economists have warned.
Output growth among American manufacturers picked up in February thanks to stronger demand and easing supply disruption, according to the latest monthly snapshot from IHS Markit.
It warned that the war in Ukraine was likely to lead to further supply chain disruption, higher inflation and a reversal in business optimism.
Although input costs increased at the slowest pace for nine months last month, selling prices ticked higher at the sharpest rate since last November.
The seasonally adjusted IHS Markit US Manufacturing Purchasing Managers’ Index rose to 57.3 in February, from 55.5 in January and only slightly lower than the ‘flash’ estimate of 57.5.
The headline figure was below the peaks seen in 2021, but signalled a stronger upturn in the health of the manufacturing sector, with sharper output and new order expansions contributing to overall growth.
Chris Williamson, chief business economist at Markit, said:
With the survey data collected prior to the escalation of the conflict in Ukraine, the full impact of the situation is yet to appear in the data. Supply chains are likely to be further disrupted, with existing shortages exacerbated by safety stock building, and prices will likely come under further upward pressure.
Perhaps most important will be the effect on business optimism and whether the improvement in prospects seen in February will be reversed, which could lead to reduced spending and investment.
Wall Street has slipped at the open, as banking stocks declined further, while surging oil prices boosted energy stocks. The Dow jones industrial average fell 80 points to 33,813, a 0.2% drop, while the S&P 500 opened almost 11 points lower at 4,363 and the Nasdaq dropped 34 points, or 0.25%, to 13,716.
While Asian shares moved cautiously higher, European shares are firmly in the red again. The UK’s FTSE 100 has lost 50 points, or 0.66%, to 7,408 while stock markets in Germany, France and Italy have all slid by more than 2%.
Oil, gas and other commodity prices continue to climb. Brent crude has jumped $6 to $103.93 a barrel after touching a seven-year high of close to $106 last Thursday, while US light crude is up $5.65% at $101.28 a barrel. Both are about 6% higher on the day.
The benchmark British natural gas contract has advanced 14.5% to 272.30p per therm and the Dutch contract has advanced 17% to €115.62 per megawatt hour.
Wheat prices have hit a fresh 13-year high and corn prices have also gained 5% in Chicago, amid fears over supply from Russia and Ukraine, major exporters of wheat and corn.
In Moscow, the rouble is sliding again, trading 5.3% lower at 99.6 per dollar. The latest western sanctions drove the Russian currency to a fresh record low of 120 per dollar yesterday. Against the euro, it has lost 3.7% to 109.9.
The Moscow stock exchange remains closed for a second day and the Central Bank of Russia said it would announce before 9am Moscow time tomorrow whether it will reopen.
Here is a round-up of today’s stories:
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