Global markets are responding negatively to the Fed’s recent comments about an interest rate hike in March, speculations of which have gripped the market for a few weeks now. The Fed indicated it could make a quarter-percentage point rise to its benchmark short-term borrowing rate to contain the 40-year-high inflation.
At the same time, the Russians are growing their presence along the Ukrainian borders, giving the global markets another reason to worry. If the Russian invasion of Ukraine materializes, the European markets are expected to take a direct hit, and the U.S. is expected to feel the ripple effects on its already volatile stock market.
Impacts of Global Developments
The uncertainty around the impact on the supply of two major resources from Ukraine —food grains and petroleum —led to a spike in oil prices that reached 7-year highs, with Brent crude futures (an oil benchmark recognized internationally) briefly surpassing $90 per barrel on Wednesday before settling around $89.96. Most of the stocks on TipRank’s best oil stock list ended in green at the market close on Wednesday.
Now, any impact on the European markets is very likely to affect its primary trade partner — the U.S. Moreover, the “lamentable” U.S.-Russia relations, as described by the Kremlin, have been long documented. So, the involvement of the Biden administration in support of Ukraine might not have the best outcome on the U.S., in case Russia really does invade Ukraine.
Global Indexes React
The two big developments, namely the Fed commentary and the geopolitical tensions, are taking the global markets by storm. U.S. stock futures dove Thursday morning, having us look at a significantly lower open on Wall Street. Meanwhile, U.S. investors turned to the safest haven —the bond market. The 10-year Treasury yield climbed 0.08% to 1.86%, and that on the 30-year Treasury bond inched up 0.05% to 2.18%.
Elsewhere, in the European markets, the pan-European Stoxx 600 index declined 0.8% early into the trading hours, led by a 2.2% shed in tech stock prices. Incidentally, all sectors in Europe, except for banking, slipped in response to the Fed decision as well as the intensifying Russia-Ukraine situation.
Also reacting to the global developments, Asia-Pacific markets dipped in the overnight trading session on Thursday. Japan’s Nikkei 225 index declined 3.3%, South Korea’s Kospi index dropped 3.13%, and Hong Kong’s Hang Seng and Hang Seng Tech indexes fell 2.56% and 4.61%, respectively. Share prices of companies in the Chinese mainland also declined.
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