Stock futures fell on Monday morning and oil prices soared as investors nervously considered the possibility of more inflation and more global economic damage from Russia’s war in Ukraine and the ensuing sanctions.
Contracts for the S&P 500, Dow and Nasdaq fell more than 1% at session lows in early trading amid risk-averse sentiment. Traders piled up safe havens and gold prices (GC=F) briefly jumped above $2,000 an ounce for the first time since September 2020. US Treasury yields rose.
In energy markets, Brent crude oil (BZ=F), the international standard, jumped to $137 a barrel, building on gains made over the past few weeks. U.S. West Texas mid-grade crude (CL=F) also rose to $130.50 a barrel.
The jump in energy prices came as the White House and European countries weighed in banning Russian crude oil imports as yet another punitive move for the country’s invasion of Ukraine. Secretary of State Anthony Blinked told CNN Sunday that the Biden administration is “now in talks with our European partners and allies to consider in a coordinated manner a ban on Russian oil imports” while ensuring that global markets are adequately supplied.
The US receives only a small fraction of its energy products from Russia, according to the Energy Information Administration: just 7% of total oil imports, including crude oil, will come from the country in 2020. However, such a ban could have a more negative impact on European countries that are more dependent on Russian crude oil as well as natural gas as a source of energy. Prices of metals used in fuel cell batteries and other clean energy products, including palladium and nickel, also rose sharply on Monday as traders anticipate an accelerated transition to renewable alternatives.
“The Russian invasion of Ukraine — and the Western response to it — will exacerbate the supply-demand imbalances at the heart of the surge in global inflation,” Ian Hatzius, an economist at Goldman Sachs, wrote on Sunday. “Reducing trade with a current account surplus country through sanctions and boycotts means the rest of the world must produce a larger share of what it consumes.”
The story goes on
Hatzius added that “the potential shift is rather small at the aggregate level” given that Russia accounts for less than 2% of global merchandise trade and gross domestic product. But in oil, Russia provides 11% of world consumption and 17% of natural gas, including as much as 40% of consumption in Western Europe.
“If Western countries buy less Russian oil, China and India could in principle buy more Russian oil and, accordingly, less Saudi and other oil, which can then go to the West,” Hatzius added. “But this ‘chaise lounge swap’ is imperfect, not only because of increased transport costs and other technical frictions, but also because China and India may not be willing to drastically increase their imports and related payments at a time when Russia is becoming a global pariah.”
Uncertainty about global trade and the supply of basic commodities further heightened fears of a further increase in inflation. Later this week, the Bureau of Labor Statistics is to release the February consumer price index, which economists expect will show an annual increase of 7.9%, the biggest jump since 1982. lifting is also possible.
“We thought February was going to be the peak,” Michelle Girard, co-head of global economics at NatWest, told Yahoo Finance Live Friday. “However, with the rise in energy prices that we are seeing, I don’t think we can assume that this will be the case anymore. there is still upward pressure.”
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8:19 am ET: Bed Bath & Beyond shares soar more than 90% after activist Ryan Cohen discloses nearly 10% stake
Ryan Cohen’s investment firm RC Ventures reported a 9.8% stake in Bed Bath & Beyond (BBBY) on Monday, sending the retailer’s shares up more than 90% in pre-market trading.
Cohen, co-founder of Chewy and chairman of GameStop, also wrote a letter to Bed Bath & Beyond’s board of directors, calling for sweeping operational changes and the board’s consideration of alternatives, including a complete sale of the company. Cohen was also critical of compensation to his top executives, even as the company faced falling stock prices and loss of market share.
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7:40 a.m. ET Monday: Stocks drop sharply at open
Here’s where the stock traded on Monday morning:
S&P 500 Futures (ES=F): -47.75 points (-1.10%) to 4,279.50
Dow futures (UM=F): -365.00 points (-1.09%) to 33,218.00
Nasdaq futures (NQ=F): -177.5 points (-1.28%) to 13,662.25
Raw (CL=F): +7.66 dollars (+6.62%) to 123.34 dollars per barrel
Gold (GK=F): +$25.40 (+1.29%) to $1992.00/oz
10 year treasury (^TNX): +5.5 b.p. up to a yield of 1.777%
NEW YORK, NEW YORK – MARCH 04: Traders work on the floor of the New York Stock Exchange (NYSE) on March 4, 2022 in New York City. The Dow fell more than 300 points in morning trading despite a positive jobs report as the war in Ukraine continues to worry investors. (Photo by Spencer Platt/Getty Images)
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter
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