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U.S. stocks gain, oil dips as NATO meets on Ukraine
Global Banking & Finance Review®
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By Lawrence Delevingne and Marc Jones
BOSTON/LONDON (Reuters) -U.S. stocks rose following choppy trading abroad on Thursday, and oil prices pulled back, as investors watched a meeting of NATO leaders on Russia’s invasion of Ukraine.
Technology companies lifted U.S. stock indexes higher at the open after a sharp fall in the previous session, with the tech-heavy Nasdaq Composite up 87.50 points, or 0.63%, to 14,010.10.
The Dow Jones Industrial Average rose 186.1 points, or 0.54%, to 34,544.6, the S&P 500 gained 30.38 points, or 0.68%, to 4,486.62.
The pan-European STOXX Europe 600 index ticked down 0.2% and MSCI’s main world stocks index, which no longer includes Russian companies, was up 0.25% on the day.
Western leaders meeting in Brussels on Thursday agreed to strengthen their forces in Eastern Europe, increase military aid to Ukraine and tighten their sanctions on Russia as Moscow’s assault on its neighbour entered its second month.
As world leaders committed to additional economic pressures, BlackRock Inc chairman Larry Fink said in a shareholder letter on Thursday that near-global economic and political isolation of Russia by many governments and businesses “has put an end to the globalization we have experienced over the last three decades”.
Holding recent gains, the U.S. dollar was flat on the day>, with the Japanese yen sinking to its lowest since 2015, as the conflict and expectations of central bank tightening kept investors cautious.
“The sharp hawkish repricing of Fed rate hike expectations has mainly benefited the U.S. dollar against low yielding currencies whose own domestic central banks are expected to lag well behind the Fed in tightening policy,” MUFG currency analyst Lee Hardman wrote in a note to clients.
HAWKISH
Driving some of the volatility, some top Federal Reserve policymakers on Wednesday signalled they stood ready to take more aggressive action to bring down decades-high inflation, including a possible half-percentage-point rate hike at the next policy meeting in May.[.N]
Minneapolis Fed President Neel Kashkari said on Thursday he has pencilled in seven quarter-point interest rate hikes this year to help rein in inflation, but warned against going too far.
Dutch European Central Bank Executive Board Member Frank Elderson said he wouldn’t rule out the ECB also raising its rates this year.
The anticipation of additional central bank interest rate increases helped reignite selling in the bond markets that have been unsettled all year by rising global inflation and signs that central banks will need to ratchet up interest rates.
The yield on benchmark 10-year Treasury notes was up 3.4 basis points to 2.355% and German Bunds crept over 0.52%, while oil and gas markets also remained jumpy amid all the geopolitical uncertainty.
Russian President Vladimir Putin said on Wednesday that Moscow would seek payment in roubles for gas sold to “unfriendly” countries, jolting energy markets, although Italy’s President Mario Draghi said it planned to keep paying in euros.
Crude prices fell on Thursday as the U.S. and its allies discussed a possible further coordinated release of oil from storage to help calm energy markets.
After rising more than 5% on Wednesday, U.S. crude was down 0.76% to $114.06 per barrel and Brent was at $120.44, down 0.95% on the day.
Goldman Sachs market analysts estimated that it would take a sustained oil price increase to $200 per barrel to produce an income shock similar in magnitude to those that precipitated U.S. recessions in the 1970s.
“While we cannot rule out such an outcome, $200 is considerably above our commodity team’s upside-risk estimate of $165,” they wrote in a note late on Wednesday.
Spot gold added 1.1% to $1,963.98 an ounce.
(Reporting by Lawrence Delevingne in Boston and Marc Jones in London;Editing by Frances Kerry and Emelia Sithole-Matarise)
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