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NEW YORK (Reuters) – Global stock markets fell while U.S. Treasury yields rose sharply on Tuesday as investors weighed the prospects for higher inflation following the gradual ban on Russian oil imports by the European Union that pushed crude prices to new record highs.
European Union leaders agreed in principle to cut 90% of oil imports from Russia, the bloc’s toughest sanctions yet on Moscow since the invasion of Ukraine three months ago. Read more
The new sanctions will apply to Russian crude delivered by shipment and be implemented in phases over six months, with refined products being implemented over eight months. The embargo excludes pipeline oil from Russia as a concession to Hungary.
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Oil prices hit new highs on Tuesday after the European Union announcement, with benchmark Brent crude rising 1.3% to $123.25 a barrel after earlier rising to $124.64 – the highest since March 9. Read more
US West Texas Intermediate (WTI) crude was trading at $117.12 a barrel, up 1.78% in the fourth consecutive session of gains.
“Energy is the input cost of basically everything and higher oil prices hurt inflation,” said Thomas Hayes, managing director at Great Hill Capital.
MSCI World Stock Index (.MIWD00000PUS), which measures stocks in 50 countries, was down 0.19%. The pan-European Stoxx 600 index fell 0.72 percent.
US Treasury yields soared, with most maturities at a one-week high, as inflation fears dominated trading after eurozone inflation surged to a record high this month.
Treasury yields also rose, driven in part by hawkish comments from Federal Reserve Governor Christopher Waller on Monday. Waller said he’s calling for a 50 basis point rate hike to be kept on the table until deep cuts in inflation are seen, removing expectations that the Fed might take a breather after the hikes in June and July. Read more
The benchmark 10-year yield rose to 2.8423%.
“The market needed to consolidate some very strong gains from last week which were a huge step off the lows and Waller gave them reason to do so,” Hayes added.
On Wall Street, the S&P 500 and Dow fell, led by the healthcare, industry and technology sectors. Crazy gains for the Nasdaq after reversing the losses of the previous session.
Dow Jones Industrial Average (.DJI) 0.26% to 33126.64 and S&P 500 (.SPX) It lost 0.16% to 4,151.68. Nasdaq Composite (nineteenth) It added 0.13% to 12146.85.
The US dollar rose across the board as rising Treasury yields and concerns about another acceleration in global inflation kept investors’ appetite for risk at bay. Read more
The dollar index, which measures the greenback against six major currencies, rose 0.316% to 101.740. The euro fell 0.45% to $1.0728.
Safe-haven gold fell and was headed for a second straight month of decline, as a stronger dollar and US Treasury yields dampened the metal’s allure despite fears of rising inflation.
Spot gold fell 0.6% to $1,845.18 an ounce. US gold futures fell 0.51 percent to $1,841.90 an ounce.
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(Covering) By Shibuike Ugo in New York Editing by Nick Ziminski
Our criteria: Thomson Reuters Trust Principles.
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