Oil is rising, stocks are rising as investors watch Ukraine, interest rates

Despite the ongoing war in Ukraine and soaring oil prices, investors have focused on interest rates. Fed Chairman Jerome Powell, who appeared before the House Financial Services Committee, said he would propose a four-percent increase in interest rates at a central bank meeting in two weeks. This eased Wall Street fears that the central bank would raise interest rates by half a percentage point.

Yields on benchmark 10-year treasury bonds rose to 1.865% from 1.708% on Tuesday. Bond yields and prices are moving in opposite directions.

Shares have been volatile in recent days as investors have followed an escalation of Russia’s war in Ukraine, as well as domestic news on the economy and inflation.

Investors are reacting to rapidly evolving events on the battlefield, a barrage of Western sanctions against Moscow and large companies that are severing ties with Russia. Rising energy prices have added to the uncertainty over the likely path of US interest rates this year.

If S&P keeps its profit, it will mark its sixth move of more than 1% – in both directions – in the last seven sessions, said Frank Capelleri, CEO of the brokerage company Instinet. These moves are a reflection of a fragile market, he said.

“We haven’t seen big moves like the one in two years,” he said, referring to the first days of the pandemic.

Following the Russian invasion, major US indexes were relatively stable, with the S&P 500 and Nasdaq Composite rising 1.9%. However, rising oil prices threaten to unleash more volatility in the markets, and stocks are still in general decline since last year, said Mr Capelleri.

Moreover, some of the current market trends, such as oil driving other assets or rising interest rates, have not been observed for years or decades, he noted. “Very few investors have survived an environment with rising interest rates,” he said.

Rising oil prices are a headache for central banks, which have been dealing with the fastest inflation rates in decades.

Energy markets continued their rapid development on Wednesday. Crude oil prices in the United States rose above $ 110 a barrel for the first time since 2014, as refineries refused to buy Russian oil, taking a bite out of global energy supplies. US crude traded at $ 112.10 and recently rose 7.4% to $ 111.09.

“The impact effects [across markets] are highly dependent on how high oil prices are, ”said Craig Erlam, a senior market analyst at Oanda. “If oil prices start to reach $ 120, we will start seeing a lot more talk about the global economic consequences of these sanctions.

The energy sector performed best in the session. Exxon Mobil rose 2.5 percent, Chevron rose 3.4 percent and ConocoPhillips rose 2.6 percent. Overseas, BP PLC rose 4.8% and TotalEnergies rose 8.2%.

Energy companies will benefit from higher energy prices, even when working to break away from Russia. Exxon said this week that it would suspend operations on a multibillion-dollar oil and gas project in Russia and make no more investments in the country. BP said on Sunday it would leave its nearly 20% stake in government-controlled Russian oil producer Rosneft.

The financial sector was the second best sector of the day, growing nearly 3% and wiping out about half of its losses earlier in the week. Berkshire Hathaway rose 2.6 percent, JPMorgan won 2.2 percent, Bank of America rose 1.9 percent and Wells Fargo rose 4.5 percent.

Among other corporate names, Nordstrom’s shares jumped 38% after the retailer forecast higher-than-expected earnings this year. Hewlett Packard Enterprise raised its earnings forecast for the year by raising shares by 11%.

In Europe, the pan-continental Stoxx Europe 600 grew by 1.2%. In Russia, trading in stocks and derivatives closed for a third day this week. The Russian ruble fell 0.7% against the dollar to 111.25 per US dollar, from 83 on Friday.

Prices have jumped into other pockets in the energy market tied to Russia. Natural gas prices in Europe jumped 37%. So far, there has been a minimal disruption to Ukraine’s pipeline system, through which about a third of Russian gas exports to Europe pass, analysts say.

The Organization of the Petroleum Exporting Countries and its Russian-led allies agreed on Wednesday to increase their total production by another 400,000 barrels a day in April, as agreed last year. This came after the United States and other major oil-consuming countries said they would release 60 million barrels of oil from their emergency reserves.

The International Energy Agency said it wanted to send a “united and strong message to global oil markets that there will be no supply shortages as a result of Russia’s invasion of Ukraine.”

In the cryptocurrency market, bitcoin is trading at about $ 43,662, according to CoinDesk, a drop of 0.3%. Russia’s invasion of Ukraine has sparked demand for cryptocurrencies in both countries, which has helped raise the price of bitcoin.

Shares in Asia have largely fallen. Japan’s Nikkei 225 lost 1.7 percent and Hong Kong’s Hang Seng ended down 1.8 percent. South Korean Kopsi, by contrast, added 0.2%.

Write to Paul Vinya at [email protected], Joe Wallace at [email protected] and Caitlin McCabe at [email protected]