For the first time in about two weeks, oil prices traded below $100 a barrel. Brent crude, the international benchmark, shed more than 7.8% to around $98.50 a barrel. West Texas Intermediate crude, the US benchmark, traded 8.2% lower around $94.50.
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“The resurgence of cases has been a stark reminder that the pandemic is still ongoing,” Russ Mold, investment director at AJ Bell, said Tuesday in comments emailed to The Washington Post. “Investors may have become too complacent about the risks of lockdowns returning again.”
The Hong Kong Hang Seng Index fell more than 5.7%, its worst closing since 2016, while the Shanghai Composite closed almost 5% lower.
Despite tensions, US stocks rose in morning trading. Around 11:30 am, the Dow Jones Industrial Average rose more than 350 points, or 1.1 percent. The S&P 500 gained nearly 1.5%, while the high-tech Nasdaq gained over 2%.
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European indices traded broadly negative at noon, with the underlying Stoxx 600 down 1 percent.
Markets hate uncertainty, but so far, uncertainty in 2022 has been inevitable. Beyond the maelstrom of coronavirus-related complications, the war in Ukraine and the resulting cascade of sanctions are also facing inflation, which is already at its highest level in 40 years. before the invasion. Households and businesses face rising prices at every stage of the supply chain and at the checkout.
The fall in oil prices did not help ease the pressure on consumers. The average cost of a gallon of US gasoline on Tuesday was $4.31, close to record highs and more than 80 cents higher than a month ago, according to AAA data.
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Wayne Wicker, chief investment officer of MissionSquare Retirement, said Tuesday’s rally likely reflects the impact of short-term trading as investors take advantage of recent selloffs.
“Despite today’s strong start, I believe a number of factors will continue to weigh on investors,” Wicker told The Post. “Until we clarify the geopolitical issues affecting Europe, as well as inflation and interest rate trends, we are likely to have a lot of volatility in global markets over the next few months.”
Investors are usually oblivious to geopolitical tensions, but the Ukrainian crisis is weighing heavily on markets due to Russia’s central role as a global energy producer. Russia produces about 10 percent of the world’s oil, on par with the US and Saudi Arabia, and rising energy prices will quickly hit the economy, adding heat to already fiery inflation.
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The CBOE volatility index, known as “Wall Street’s fear indicator”, has risen nearly 50% in the past 3 months, according to MarketWatch.
Investors are focused on the Federal Reserve meeting starting Tuesday, looking for signs of how far the central bank will go in raising its key interest rate, its main weapon against inflation. This increase will be the first after two years of very flexible monetary policy by the Fed amid the pandemic.
Ivan Feinseth, chief investment officer at Tigress Financial Partners, said Russia’s war with Ukraine has “significantly disrupted the US and global economy” and is making it harder for “what would be a positive monetary trend” to start raising rates amid strong employment. profit and consumer demand.
Now, as Feinseth said Tuesday in comments emailed to The Post, the Fed must weigh the fallout from the war against “the possibility that higher rates could further undermine, rather than slow, the economic recovery.”