European stocks fought for direction on Wednesday as Brent crude oil and natural gas prices rose in response to intensified Russian attacks on Ukraine’s largest cities.
The regional Stoxx Europe 600 switched between gains and losses in morning trading after a sharp decline in the previous session, as investors balanced the potential for economic consequences of the crisis with that of central banks to reverse previous signals that they are ready to end the pandemic. support.
Hong Kong’s Hang Seng index fell 1.8 percent, while futures contracts tracking the S&P 500 index on Wall Street added 0.8 percent.
Brent crude, the international benchmark, rose 5.9 percent to $ 111 a barrel after US President Joe Biden declared Russia isolated from the world and hinted at new economic sanctions.
Meanwhile, European natural gas prices have reached record highs. Futures related to TTF, Europe’s wholesale natural gas price, rose more than 50 percent to 185 euros per megawatt-hour before cutting its profits to 146 euros.
Sanctions imposed on Russia by Western countries have so far sought to evade the energy sector, but have nevertheless caused instability in global markets due to fears of supply disruptions.
“Brent crude oil is the biggest factor in fears for stock markets,” said Martin Gerdinck, head of European equities at Dutch investment firm NN Partners. “If it becomes ballistic and moves to $ 150 or more per barrel, then [economic] growth is really slowing down. ”
But Ross Mayfield, an investment strategist at Baird, said: “The war has a sense of risk aversion, but it could also put the Federal Reserve and other central banks on a less aggressive path of tightening.
Yields on the German reference 10-year Bund rose 0.03 percentage points to minus 0.04 percent. This was followed by a sharp rise in US, UK and eurozone government bonds on Tuesday as derivatives markets began to price at a much slower pace than central banks, which were expected to emerge from monetary support from the pandemic era. with a series of interest rate hikes.
Yields on 10-year US government bonds rose 0.02 percentage points to 1.73%. This debt yield, which is at the heart of global borrowing costs, fell by almost 0.1 percentage point on Tuesday and returned to levels last seen in January, before Fed Chairman Jay Powell prepared financial markets for the series from aggressive interest rate hikes.
The latest oil gains, which have left Brent about 15 percent higher since President Vladimir Putin began his invasion of Ukraine, came as Russia stepped up bombings of its neighbor’s largest cities. Prices have risen, although the United States and 30 other countries have said they will release 60 million barrels of their strategic reserves.
Biden has come under increasing pressure to ban Russian oil imports, with Republicans and Democrats calling on the US president to sever energy ties with the Kremlin. In a speech on the state of the Union on Tuesday, Biden voiced support for sanctions against Russia, but stressed that price control was his “highest priority”.
Russia’s central bank said the Moscow Stock Exchange, which was not open for trading on Monday, would remain closed on Wednesday.