S&P 500
Oil prices jumped, European natural gas futures soared, and global stock markets tumbled as Russia launched an invasion of Ukraine, raising fears of the wider economic crisis that could follow.
Stocks on Wall Street had followed European and Asian markets lower early in the day, but rebounded off its lows in the afternoon and the S&P 500 rose about half a percent.
The early impact on financial markets was immediate and broad, starting in Asia, where the Hang Seng in Hong Kong slid 3.2 percent. In Germany, the DAX index fell nearly 4 percent, while stocks in Moscow collapsed, with the major benchmark down 33 percent, while the ruble fell to a record low against the dollar.
The potential for a wider war increases the risk of runaway inflation, posing profound questions for the Federal Reserve and other central banks. Worries about inflation had already soured the mood in stock markets this year, and the potential for an invasion of Ukraine only added to those concerns. In the week through Wednesday, the S&P 500 had fallen 5 percent as the tension in Eastern Europe rose.
Further stock market declines would not be unexpected if the Russian hostilities continued to frighten investors, analysts said.
“Russia invading Ukraine has added to an already tense year, with investors selling first and asking questions later,” said Ryan Detrick, the chief market strategist of LPL Financial.
Even the recovery on Wall Street late Thursday pointed to the market’s sensitivity to the outlook for inflation. Stocks rallied as oil prices came off their highest point of the day, after President Biden said that the United States and its allies were prepared to release supplies from oil reserves if needed.
By Thursday afternoon, Brent crude oil, the global benchmark, was up 2.3 percent at about $99 a barrel — well off its highest point of the day when it was above $105 a barrel.
Dutch front-month gas futures, a European benchmark for natural gas, rose about 33 percent to above 118 euros a megawatt-hour. Russia provides more than a third of the European Union’s gas, with some of it running through pipelines in Ukraine. A year ago, the gas was selling for about 15 euros a megawatt-hour.
Steep increases in the price of oil and natural gas, as well in metals like nickel, aluminum and palladium, and in agricultural staples like wheat and sunflower oil are likely to spill over into the real economy and raise the inflation level in Europe and the United States by as much as 1.5 percentage points in the next few months, said Capital Economics, a research firm. Inflation in the United States is already at 7.5 percent a year.
Concerns about the economy are increasing at an awkward time for central banks, whose interventions have reversed many steep global stock market declines in the past. Policymakers have less room to do so now because they are committed to raising interest rates to combat inflation.
“There’s clearly a lot less scope for them to actually loosen now given how tight labor markets are and how difficult a problem inflation is,” said Neal Shearing, chief economist for Capital Economics.
The ultimate goals of President Vladimir V. Putin of Russia are not yet clear, and Western sanctions are being adjusted in increments in an effort to persuade him that the costs of a full-scale invasion and occupation of Ukraine will be too high for Russia to bear, said Angela E. Stent, a former national intelligence officer for Russia and Eurasia at the National Intelligence Council.
Russia’s Attack on Ukraine and the Global Economy
A rising concern. Russia’s attack on Ukraine could cause dizzying spikes in prices for energy and food and could spook investors. The economic damage from supply disruptions and economic sanctions would be severe in some countries and industries and unnoticed in others.
Mr. Putin has been pushing for more than a decade for western recognition “of a Russian sphere of influence in the post-Soviet states,” and may not stop unless he is forced to do so, she said in an online Council on Foreign Affairs conference on Wednesday.
On Thursday, Mr. Biden said the United States would cut off Russia’s largest banks and largest companies from the western financial markets, restrict exports of technology to Russia and freeze trillions of dollars in Russian assets.
With more severe financial sections against Russia in the works, banks stocks fell faster than the markets overall. Shares of European banks with the biggest Russian operations plunged: Raiffeisen of Austria fell 23 percent, while UniCredit of Italy fell 13.5 percent and Société Générale of France lost about 12 percent.
In the United States, JPMorgan Chase fell about 3.5 percent and Citigroup slid 4.8 percent.
Energy stocks also fell on Thursday, but they have been a bright spot for investors who have owned them this year. With a gain of more than 19 percent since Dec. 31, it is the only sector in the S&P 500 to be up for the year. Halliburton, Occidental Petroleum, Marathon Oil, Hess and Exxon Mobil are among the fossil fuel stocks that have gained more than 20 percent in 2022.
Anton Troianovski, Austin Ramzy, William P. Davis and Jason Karaian contributed reporting.
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February 25, 2022 at 03:29AM
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Stock and Energy Markets Whipsaw After Russian Attack on Ukraine - The New York Times
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