However, deadly attacks in Ukraine continued to rage. Oil fell, stocks rose and investors shifted away from gold and traditional havens when there is fear.
Following a wild Thursday where the benchmark index suffered a loss of 2.6% to gain 1.5%, the S&P 500 gained 2.4%. Other indices gained Friday as well, with the Dow rising by 2.5% and the tech-heavy Nasdaq rising 1.6%.
Stocks have moved sharply this week as investors remain uncertain about the impact Russia’s invasion on inflation and oil and natural gas prices.
These swings will continue for the next few weeks, with uncertainty about Ukraine and interest rates. The Federal Reserve is in a delicate situation where it must raise interest rates sufficiently to control high inflation, but not too much to trigger a recession.
At least Friday morning was more peaceful. Wall Street’s fear, which is a measure of how concerned traders are about future swings in stock markets, fell by 7%. After rallying for weeks due to fears about Russia and Ukraine, gold fell 1.9%. The Treasury yields remained relatively stable, indicating that investors were not as anxious for safety after Russia’s invasion.
According to reports, Russia has offered to send a delegation from Russia to Belarus to hold talks with Ukrainian officials. The U.S. government reported that the inflation rate last month was in line with economists’ expectations. However, it was still very high. The report also revealed that the U.S.’s main engine, the spending of consumers, was stronger than expected.
Brian Jacobsen (senior investment strategist at Allspring Global Investments) said that the economic reports could convince the Federal Reserve not to raise short-term rates by twice its normal increase next month. This is something that Fed officials suggested and investors often fear, as higher rates can put downward pressure on all types of investments. No matter how large it may be, this rate hike would be the first since 2018.
Tickers vs. tanks
The backdrop of Russia’s invasion of Ukraine on Friday was the reason for all the calm in the global financial markets. Russia launched airstrikes against cities and military bases, and sent in tanks and troops from three countries in the most extensive ground conflict in Europe since World War II.
The uncertainty surrounding Russia and Ukraine has caused prices to swing sharply, with everything from stocks to Bitcoin. But oil and natural gas have been the most prominent market focus. Russia is the largest producer of oil and gas in the world, and European consumers are especially dependent on it.
Oil prices dropped on both sides, one day after reaching $100 per barrel. This was despite concerns that supplies could be disrupted by the conflict and upcoming sanctions. The benchmark U.S. crude oil price fell 1.5% to $91.43 a barrel. Brent crude, an international standard, dropped 1.6% to $93.93.
Joe Biden, President of the United States, said Thursday that he would do everything in his power to reduce the pain that the American people feel at the pump. This led to some relief, as sanctions were not as severe and oil prices dropped helped to lift stocks.
Daleep Singh, Deputy National Economic Council Director, stated Thursday that “we’re not going do anything which causes an unintended interruption to the flow of electricity as the global recovery is still underway.”
Friday’s stock market gains were also seen across Europe and Asia, as stocks recovered some of the sharp losses they suffered from Russia’s invasion. London’s FTSE 100 rose 3.8%, France’s CAC 40 rose 3.2%, and Germany’s DAX rose 3.2%.
According to Ipek Ozkardeskaya, Swissquote Bank SA, market players may be betting that the crisis will slow central bank moves to cool inflation by raising interest rate and unwinding support for pandemic burdened economies.
Ozkardeskaya commented, “But in reality, it’s volatility, high volatility which results from a high voltage environment.” “It is impossible to predict the direction of the market in the next five minute.”
