Stocks rebound as markets pause and oil prices cool

LONDON: European stock markets rose on Wednesday as investors paused after three days of selling, while oil prices retreated slightly from their last peak.

Russia has accused the United States of declaring economic war, after US President Joe Biden announced a ban on Russian oil exports on Tuesday.

Western sanctions cut Russia off from world trade and financial markets in response to its invasion of Ukraine.

But after three days of losses, the MSCI World Stock Index, which tracks stocks in 50 countries, was up 0.7% on the day at 12:24 GMT.

The European STOXX 600 gained 3.1% and Wall Street futures also rose.

Peter McCallum, rates strategist at Mizuho, ​​said the rebound in equities was a temporary rally that could be attributed to news of talks between Russia and Ukraine.

“People think we may have seen the worst of the escalation for the foreseeable future,” he said, describing the day’s rebound as “consolidation.”

“Perhaps markets are less panicked by the escalation of conflict in other regions than they were at the start of the week.”

Analysts saw the rebound as a technical correction, rather than a signal of a tangible shift in sentiment about the conflict, which is Europe’s biggest war since World War II.

“For now, markets are relieved that we haven’t had any further bearishness since yesterday’s announcement of a ban on oil imports from Russia,” market analyst Fawad Razaqzada said. at Think Markets.

“Markets have been heavily oversold…it’s also typical of a bear market when you sometimes see multi-percentage-point gains in a short period of time as the shorts are tight, before the rally fizzles out and that the downward trend resumes.”

“TURBOCHARGED” AMENITIES

The Russian invasion and ensuing sanctions disrupted global supply chains, driving up prices in the commodity market.

Oil prices rose after the U.S. ban, which Goldman Sachs analysts said had already been priced in, but as of 12:38 GMT on Wednesday had pulled back somewhat.

Brent crude futures were at $124.78 a barrel, down 2.5% on the day, after falling from Monday’s high of $139.13.

JPMorgan analysts said that over the past two weeks the war has sparked the highest commodity price inflation in more than 60 years.

“Russia has dominant supply positions in: nickel, palladium, platinum, rhodium, aluminum and copper,” JPMorgan said.

Dan Scott, chief investment officer at Vontobel, said “turbo” inflation in commodity prices leaves central banks in a “sticky spot”.

“War is inflationary and this particular war is very inflationary…not just in terms of energy, oil and gas, but it’s inflationary in the commodity complex,”

“Grain prices don’t react to central bank policy, nor do nickel prices…raising interest rates won’t have a direct impact.”

The London Metal Exchange intervened on Tuesday to calm the nickel market after prices soared within hours to record highs of more than $100,000 a tonne.

After a four-session rally, gold fell on Wednesday as markets became less risk averse .

The safe-haven dollar fell 0.5% to 98.572 against a basket of currencies.

Yields on German government bonds rose ahead of Thursday’s European Central Bank meeting.

The 10-year US Treasury yield was a bit higher at 1.9061%.

Elsewhere, bitcoin led a rally in cryptocurrencies after an apparently premature statement on the US Treasury website eased fears of a sudden tightening of US rules on these assets.

(Reporting by Elizabeth Howcroft; additional reporting by Samuel Indyk; editing by John Stonestreet and Chizu Nomiyama)

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