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Oil Prices Drop 30% in a Week?

Oil Prices Drop 30% in a Week?

The Price of Oil has plummeted 30% in a week.
What. The. Heck.

Following Russia’s invasion of Ukraine, global oil prices skyrocketed.

Brent crude jumped above $139 per barrel just over a week ago. Analysts predicted that prices may hit $185, then $200 as traders shied away from Russian oil, driving up inflation and putting a burden on the global economy.

Since then, however, there has been a sharp turnaround. Brent crude prices, the global benchmark, are down nearly 30% from their high. After losing another 7% on Tuesday, they’re now trading below $100 per barrel.

What’s going on: The unusually fast reduction has been fueled by optimism that Saudi Arabia and the United Arab Emirates will increase oil production, and that Chinese consumption will fall as a result of new coronavirus restrictions in large cities. This would help to relieve the market’s stress.

Analysts warn, however, that we are not yet out of the woods. Oil is still selling at a considerable premium to its cost of production, and severe fluctuations are expected to continue in this period of great uncertainty.

“I wouldn’t rule out $200 per barrel just yet,” Bjrnar Tonhaugen, Rystad Energy’s head of oil markets, is quoted as saying. “It’s far too early.”

Oil prices soared after the invasion, as traders began to see Russian petroleum exports as untouchable. This has generated concerns about how that supply of 4 to 5 million barrels per day would be replenished, especially when demand for gasoline rises throughout the summer.

Investors, on the other hand, appear to be questioning if they went too far, too quickly in the last week. The UAE’s ambassador to Washington stated that the government wants to expand oil output, raising expectations that the Organization of the Petroleum Exporting Countries, or OPEC, could finally interfere. Meanwhile, despite the ongoing conflict, Russia and Ukraine continue to communicate.

In the near run, China’s resolve to preventing the spread of Covid-19, which has resulted in a lockdown in the tech capital of Shenzhen and new regulations in Shanghai, might mean the country requires less energy. On a daily basis, China imports roughly 11 million barrels of oil.

“People realized we’re still in the middle of an pandemic,” Tonhaugen explained.

Why it matters: The decline in oil prices has helped keep gasoline costs in the United States from rising. For the time being, they’ve leveled down, albeit a gallon of petrol still costs over $4.32 on average.

While $100 per barrel of oil is still quite costly, if prices continue in that range, it may alleviate some concerns about inflation speeding up.

Policymakers would probably feel a sigh of relief.

Investors, on the other hand, appear to be uneasy as they analyze the fallout from Russia’s incursion. Russian oil continues to trade at a $26 discount to Brent.

Analysts feel the course of events has been determined.

According to Giovanni Staunovo of UBS, oil will trade at $125 a barrel by the end of June. Tonhaugen of Rystad Energy, for one, believes that while the war progresses, prices will continue to break records.

He explained, “This is the calm before the storm.”

 

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Oil Prices Drop 30% in a Week?

Food Is About To Get A Lot More Expensive…

Food Is About To Get A Lot More Expensive…

According to Svein Tore Holsether,
the globe is on the verge of a food crisis that will affect millions of people

Skyrocketing natural gas prices have prompted Yara International, the fertilizer firm he oversees, to reduce ammonia and urea production in Europe to 45 percent of capacity.

He anticipates global food supplies to suffer if those two crucial agricultural elements become scarce.

“It isn’t a question of whether or not there will be a food crisis.
It’s a question of how big the crisis will be”
says Holsether.

Prices of important agricultural items produced in the region have risen two weeks after Russia invaded Ukraine.

Wheat, a pantry staple, is the most serious issue.

Russian and Ukrainian wheat supplies, which account for over 30% of world wheat trade, are now in jeopardy. This week, global wheat prices reached an all-time high.

Another key issue is fertilizer availability. It’s never been more expensive for farmers to meet their agricultural production quotas, as Russian exports grind to a standstill. The rising price of natural gas, a major element in nitrogen-based fertilizers like urea, has also lowered output in Europe.

Experts in global health are concerned about the situation. Corn, soybeans, and vegetable oils have all seen price increases.
G7 agriculture ministers said Friday that they “are resolved to do whatever it takes to avoid and respond to a food crisis.”

Countries Are Ceasing Exports, Stockpiling For Their Own Needs

Fearing food shortages, governments are moving inward, perhaps leaving less food for people in need.

Egypt has now banned the export of wheat, flour, lentils, and beans, citing mounting concerns about the Arab world’s most populated country’s food stocks. In addition, Indonesia has increased export limits on palm oil, which is used in cooking oil, cosmetics, and other packaged goods such as chocolate. It is the world’s leading manufacturer of the product.

“Keep your food and agricultural markets open and guard against any unwarranted restrictive measures on your exports,” the G7 ministers said.

“Any additional increase in food price levels and volatility in international markets could undermine food security and nutrition on a worldwide scale,” they warned in a statement. “This is especially true among the most vulnerable living in low-food-security circumstances.”

Western countries with greater agricultural access will also be harmed. Consumers in that country have already been hit by increasing prices, and the situation is set to worsen.

The global food system was already strained before Russia initiated a war in Ukraine. Food prices have already reached their highest level in roughly a decade due to clogged supply lines and unpredictable weather patterns, which are often the effect of climate change. After the pandemic, which caused millions of people to lose their jobs, affordability became a concern.

According to the UN’s World Food Programme, the number of people on the verge of famine has increased to 44 million from 27 million in 2019.

The conflict between Russia and Ukraine, both of which play critical roles in the precisely calibrated global food production system, is likely to exacerbate the problem.

In recent days, global wheat prices have dipped from record highs, but they remain high. According to Rabobank commodity expert Carlos Mera, they’re projected to stay that way for a while.

Fighting will delay the wheat growing season in Ukraine, which is about to begin. As individuals in the country take up guns, it’s unclear if there will be enough farmers to till the land, or whether they will be able to get machinery and other vital supplies that would normally arrive through Black Sea ports.

“No one knows whether Ukraine will be able to export anything for the rest of this year, next year, or in the near future,” Mera added. In addition, the country exports half of all sunflower oil.

Businesses don’t want to risk running afoul of sanctions or cope with the complexities of traveling near a war zone, so getting Russian items onto the global market has become increasingly difficult.

Russia and Ukraine serve as a breadbasket for import-dependent countries in the Middle East and North Africa. As a result, many people will be severely impacted. The suffering will be felt in the United States and Europe as well, because the rise in costs for key agricultural items will harm firms that produce food in every market.

In a recent report, the Agricultural Market Information System stated, “Any substantial disruption of production and exports from these suppliers will no doubt drive up prices further and erode food security for millions of people.”

Beyond wheat and oils, a crisis is looming. Russia, along with its partner Belarus, is a major exporter of fertilizers, which are required to produce a variety of crops. However, everyone is avoiding their stock at the moment.

“No one wants to touch a Russian product right now,” said Deepika Thapliyal of Independent Commodity Intelligence Services, a fertilizer expert. “If you look at all the traders and purchasers, they’re all terrified.”

Adding Fuel to the Fire: The Increasing Cost of Natural Gas

Natural gas prices are compounding the problem. Fertilizer producers outside of Russia and Belarus require gas to manufacture nitrogen-based products such as urea, which is used to improve production and even promote the rich green color of crops.

However, Yara’s CEO, Holsether, claims that expenses have risen too high to keep operations functioning at scale. He has no idea when European production will be back up to full capacity.

“A major portion of the industry is at risk of not being able to provide items to farmers, which will have an immediate impact on crop output,” he said.

Farmers have an incentive to spend what they need for fertilizer right now because the price of their products is also rising. This isn’t an option for everyone, though. According to Chris Lawson, the head of fertilizers at CRU Group, a market intelligence organization, urea has been trading near $1,000 per metric tonne, over four times the price at the start of 2021.

Countries that do not produce fertilizer domestically may find it difficult to obtain it, with serious ramifications for the global food chain.

“You can’t grow large fields of wheat, barley, or soy without fertilizer,” said Johanna Mendelson Forman, a war and food expert at American University. She stated that farmers in Mexico, Colombia, and Brazil are already concerned about shortages.

Andrey Melnichenko, a Russian fertilizer and coal tycoon, defied President Vladimir Putin on Monday and appealed for peace in Ukraine, warning that a worldwide food crisis looms.

According to Melnichenko, the battle “has already resulted in increasing fertilizer prices that are no longer affordable to farmers. It will now result in even higher food inflation in Europe, as well as possible food shortages in the world’s poorest countries,” he continued.

The G7 agriculture ministers stated on Friday that their countries would use humanitarian aid to help alleviate the war’s effects where possible. However, they may be hampered by a scarcity of supply and rising pricing.

“If Ukrainian fields stand fallow this year, assistance agencies like ours will be forced to find new markets to compensate for the loss of some of the world’s greatest wheat,” warned David Beasley, executive director of the World Food Programme, in a Washington Post op-ed published this week. “However, this will come at an astronomically high price.”

Beasley pointed out that Ukrainian wheat has also been critical in feeding people in conflict-torn nations such as Afghanistan, Sudan, and Yemen.

“The vast bulk of wheat is consumed by humans, and this is irreplaceable,” said Rabobank’s Mera.

And the consequences will not be limited to countries suffering from famine or war.

Food affordability is a concern for lower-income buyers everywhere, according to Mendelson Forman. According to the Urban Institute, nearly one in every seven American individuals experienced food insecurity in the previous 30 days in April 2021.

“We’re used to a globalized commerce system to buy various kinds of food,” she explained. “People will see it in their wallets and at the food stores,” says the author.

With costs going up for fertilizer, a shortage of product and increased shipping costs, it looks like the cost of food will continue to increase.

The Only Way To Combat Inflation Is to Make More Money. Here’s How:

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Food Is About To Get A Lot More Expensive...

Goldman Sachs: 35% Chance of Recession This Year

Goldman Sachs: 35% Chance of Recession This Year

The war in Ukraine, rising inflation, increasing interest rates
= higher chance of recession this year

Europe’s dependency on Russian energy has increased the chances of the area entering a recession this year, as rising prices forces people to cut back on spending. The United States is more protected against the rise in oil and gas costs than other countries, but it is not immune.

Goldman Sachs has lowered its growth prediction for the United States in 2022. During the first three months of the year, it has seen little to no growth.

The likelihood of a recession in the United States during the next year has grown to as high as 35 percent, according to Goldman’s analysts, lead by Jan Hatzius.

“Rising commodity prices will almost certainly have a negative impact on consumer spending, as households — particularly lower-income households — are forced to spend a larger share of their income on food and gas,” they told clients on Thursday.

Morning Consult and Ipsos real-time data on consumer confidence “suggest a dramatic fall in consumer confidence since Russia invaded” Ukraine, they said.

It isn’t going to be the only cause of anxiety. Financial conditions have tightened as well, perhaps making it more difficult for enterprises to obtain funds. America’s worldwide supply lines and operations will be harmed as a result of Europe’s problems.

Sanctions imposed on Moscow as a result of the invasion of Ukraine are wreaking havoc on the Russian economy. According to the Institute of International Finance, it would contract by 15% this year, which would be twice as bad as the recession that followed the global financial crisis.

However, because Russia is a significant supplier of oil and gas, as well as important agricultural products and industrial metals, the consequences of its economic collapse and isolation would be felt worldwide. Europe is the most vulnerable, as it is heavily reliant on Russia for energy, but the rise in energy and food costs will be felt across the Atlantic as well.

A US recession is not a certain conclusion. Wells Fargo predicted a recession in Europe but not in the United States on Thursday. Treasury Secretary Janet Yellen said in an interview with CNBC on Thursday that the labor market is strong and that American households are in “excellent financial position.”

“Inflation is a concern that we need to address,” Yellen added, “but I don’t predict a recession in the United States.”

Goldman Sachs experts aren’t the only ones who see hazards increasing.

In a recent CNN Business piece, Mark Zandi, the chief economist of Moody’s Analytics, said, “There is a growing fear that increasing inflation could overcome the nation’s solid economic recovery, ending in a recession.”

The Federal Reserve will be under even more pressure as it considers its next step as a result of this. As part of its effort to bring inflation under control, the central bank plans to begin hiking interest rates this month. However, if it withdraws assistance for the economy too quickly, a recession may be more likely.

Despite the conflict in Ukraine, the European Central Bank announced on Thursday that it will restrict the money taps sooner than planned. Investors were taken aback by the hawkish tone.

“The US is likely to outperform Europe, which is likely to slip into recession, owing to the American economy’s greater internal resilience and agility,” the economist Mohamed El-Erian wrote in a column published this week. “However, the US Federal Reserve’s failure to respond to inflation in a timely manner last year — a historic policy mistake — will undermine policy flexibility.”

Investor Uncertainty

As the fight continues, investors will be wary of high inflation and weaker economic growth, as well as uncertainty about how much central banks can truly do to interfere.

Wells Fargo has decreased its S&P 500 year-end projection for 2022. It believes the index will continue to increase rapidly from present levels. However, the bank noted that war-related economic circumstances are expected to hurt corporate profitability, putting pressure on equities.

Following the invasion of Ukraine, Goldman Sachs (GS) and JPMorgan Chase (JPM) became the first big Western banks to pull out of Russia on Thursday. There will very certainly be more, at a cost of tens of billions of dollars.

Goldman is “winding down its operations in Russia in accordance with regulatory and licencing requirements,” according to the latest news. JPMorgan Chase followed suit with a similar announcement.

The withdrawals come as Western banks scrambled to assess their exposure to Russia following President Vladimir Putin’s invasion of Ukraine, which triggered harsh sanctions against the country’s financial system, including its central bank and key commercial lenders, VTB and Sberbank.

They also come after Western corporations have fled practically every other area of Russia’s economy, and ratings agencies have predicted a Russian debt default.

Remember that untangling Russia from the global financial system would be difficult, and the full scope of the consequences is still unknown.

According to the Bank for International Settlements, which banned Russia’s membership on Thursday, Russian firms owe more than $121 billion to international banks. Total claims against European banks amount to more than $84 billion. The countries with the most exposure include France, Italy, and Austria. $14.7 billion is owing to US banks.

Banks are also concerned about their Russian staff and what Moscow may do next.

Dmitry Peskov, a Kremlin spokesman, claimed Thursday that Russia’s economic condition is “totally unique,” and accused the West of starting an “economic war.”

Meanwhile, Putin has backed efforts to acquire assets left behind by Western corporations that have halted or abandoned operations in the country.

Meanwhile, In China…

The future of big Chinese firms traded on Wall Street has been put into question once again, sending prices plummeting.

The Securities and Exchange Commission of the United States said on Thursday that five Chinese businesses may be delisted from American stock exchanges for failing to fulfill auditing criteria.

Yum China Holdings, ACM Research, BeiGene Biotech, Zai Lab, and Hutchmed Pharmaceuticals were among the companies on the list.

Big tech stocks, on the other hand, were down. Investors are anxious that the US agency may add more businesses to the list.

Alibaba fell more than 5% in Hong Kong on Friday. On Thursday, its shares on the New York Stock Exchange fell roughly 8%. After finishing 16 percent down on Wall Street, JD.com dropped 11% in Hong Kong. Following a 6 percent decrease in the United States, Baidu was down about 5%.

Other corporations with dual listings in the US and Hong Kong saw their stock prices plummet as well.

Goldman Sachs: 35% Chance of Recession This Year

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Mortgage Rates Are Rising, Adding to Inflationary Costs

Mortgage Rates Are Rising, Adding to Inflationary Costs

Mortgage rates are rising again, fueled by concerns about growing inflation

According to Freddie Mac, the 30-year fixed-rate mortgage averaged 3.85 percent in the week ending March 10, up from 3.76 percent the week before.

Fears of inflation and geopolitical uncertainty are both having an effect, according to Freddie Mac’s senior economist, Sam Khater.

“We expect rates to continue to climb in the long run as inflation broadens and shortages affect more sectors of the economy,” Khater added. “However, rate volatility is being driven by concern regarding the crisis in Ukraine, and this is likely to persist in the immediate term.”

According to George Ratiu, Realtor.com’s manager of economic analysis, the 30-year rate returned this week following a surge in the 10-year Treasury, which exceeded 1.95 percent.

“Investors are concerned about rising inflation as a result of a possible restriction on Russian oil imports, since the price of US crude has risen to almost $130 per barrel, the highest level in 13 years,” he added.

Inflation rose at its quickest rate in 40 years in February, raising fears of a consumer spending slowdown in the months ahead, according to Ratiu.

Last month, prices continued to rise, pushing a key inflation indicator to levels not seen since January 1982.

All eyes are on the Federal Reserve, which will meet next week and is likely to raise the federal funds rate in an effort to keep inflation under control.

“The key concern on many analysts’ minds is whether a 25-basis-point raise would be sufficient given the considerable labor shortage and inflation at levels not seen since the 1980s,” Ratiu said.

As the spring sales season heats up, the real estate market continues to see rising prices and record low inventories.

According to Realtor.com, a buyer of a median-priced property today faces a mortgage payment that is more than $290 per month more than a year ago.

“With a shortage of homes for sale, both first-time buyers and homeowners searching for a trade-up property are trapped by rising prices and borrowing rates,” Ratiu explained. “The actual problem for Americans is that rising inflation is eroding pay and salary growth, on top of rising housing and living expenditures.”

With rising inflation increasing costs and decreasing the buying power of the consumer paycheck, it’s only a matter of time before something breaks.

Mortgage Rates Are Rising, Adding to Inflationary Costs

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The FED to Shrink Its Balance Sheet, Plunging Economy into Recession

The FED to Shrink Its Balance Sheet, Plunging Economy into Recession

The FED’s bond purchases from their qualitative easing program
has provided liquidity to the markets.
They’re pulling that back now – it could crash the stock market and plunge the economy into recession if done too quickly

Members of the Federal Reserve are arguing how swiftly the central bank should shrink its bond portfolio without triggering a recession.

The Federal Reserve’s asset balance is about $9 trillion as of the second quarter of 2022. The majority of these assets are government debt and mortgages that have been securitized. The majority were bought to reassure investors amid the subprime mortgage crisis of 2008 and the pandemic of 2020.

“What’s occurred is that the balance sheet has evolved into a policy instrument.” Former Vice Chairman of the Federal Reserve Board of Governors Roger Ferguson told CNBC. “The Federal Reserve is using its balance sheet to achieve unprecedented results.”

The Federal Reserve of the United States has traditionally utilized its role as a lender of last resort to inject liquidity into markets in times of crisis. When the central bank purchases bonds, it may encourage investors to pursue riskier investments. Despite difficult economic conditions for small firms and regular employees, the Fed’s actions have benefited US stocks.

According to Kathryn Judge, a Columbia Law professor, the Fed’s stimulus is like lubricant for the financial system’s wheels. “There are fears that if they apply too much grease too frequently, the whole machinery would become risk-seeking and vulnerable in other ways,” she told CNBC in an interview.

Analysts fear the Fed’s decision to raise interest rates in 2022 before rapidly shrinking its balance sheet might trigger a recession if riskier assets are revalued.

But the FED doesn’t have a lot of options that won’t rock the stock market boat when it comes to fighting runaway inflation.

The FED to Shrink Its Balance Sheet Plunging Economy into Recession

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US Government Investigating the “Risks” & “Benefits” of Crypto

US Government Investigating the “Risks” & “Benefits” of Crypto

[ CRYPTO MARKET ] The government is investigating
“Consumer and investor protection”, “financial stability”
and other STUFF

On Wednesday, US President Joe Biden issued an executive order directing the federal government to investigate the dangers and advantages of cryptocurrencies.

It’s been a long time coming, and the crypto industry has been waiting for it, not least because of mounting regulatory concerns throughout the world about the young digital asset market.

There had been rumors of a rift between White House officials and Treasury Secretary Janet Yellen, which had caused the policy’s implementation to be delayed.

The bitcoin market learned about the executive order overnight after the Treasury unintentionally issued a statement calling it “historic” and leaking certain facts ahead of time.

On Wednesday, the order was ultimately signed. According to a White House information sheet, it asks for federal agencies to take a uniform approach to the regulation and monitoring of digital assets.

The guideline places a strong emphasis on consumer protection. There have been several reports of investors falling prey to cryptocurrency scams or losing large quantities of money as a result of cyberattacks on exchanges or users.

The Biden administration has asked the Treasury Department to analyze crypto and make policy suggestions. Regulators should also “provide proper control and safeguard against any systemic financial risks presented by digital assets,” according to the report.

While governments have been careful to dismiss any systemic dangers associated with cryptocurrency, worries about the role of stablecoins have grown. These are digital tokens that are supposed to be tied to actual currencies like the US dollar.

Tether, the world’s largest stablecoin, has drawn the wrath of authorities amid claims that its token is not properly backed by dollars kept in reserve. Tether claims that its coin is completely backed, although its reserves are made up of short-term financial liabilities such as commercial paper, not only cash.

Stablecoins were noticeably omitted from the White House announcement on Wednesday, despite Yellen’s stated desire for Congress to provide legislation for the industry.

Another major objective of Biden’s executive order is the abolition of unlawful crypto activities.

President Biden has called for a “unprecedented emphasis of concerted action” from government agencies to combat illegal finance and national security threats presented by cryptocurrencies. He’s also calling for international cooperation on the subject.

Last month, US authorities confiscated $3.6 billion in bitcoin — their largest cryptocurrency seizure ever — in connection with the 2016 breach of crypto exchange Bitfinex.

Following Russia’s invasion of Ukraine, officials are increasingly concerned about the use of cryptocurrency to enable sanctioned Russian people and corporations circumvent the sanctions.

However, proponents of crypto argue that laundering money with digital currency is extremely difficult since all transactions are recorded publicly on the blockchain, which is an immutable record-keeping system.

Biden also mentioned the enormous energy cost embedded into digital currencies like bitcoin, but it was a more subtle remark. He wants the government to look into methods to make crypto innovation more “responsible” (less harmful to the environment).

To confirm transactions and produce additional units of money, Bitcoin uses a method known as proof of work. To mine bitcoin, a decentralized network of computers competes to solve challenging arithmetic riddles. A miner’s chances of getting paid in fresh bitcoin increase as their computer power increases.

This has alarmed officials throughout the world, with China banning cryptocurrency mining entirely last year. This prompted a crypto mining migration from the nation to the United States and other countries, including Kazakhstan.

The White House statement includes wording aimed at giving the United States a competitive advantage over other countries when it comes to crypto development. This is especially important now that cryptocurrencies have been essentially outlawed in China.

The Department of Commerce has been entrusted by Biden with “creating a framework to advance U.S. competitiveness and leadership in, and exploiting, digital asset technology.”

Several crypto industry leaders, including the CEOs of Coinbase, Kraken, and the Winklevoss twins’ Gemini exchange, have urged for such action.

Biden “has the chance to assure America stays the world leader for technical innovation for years to come,” according to the Blockchain Association, which represents a number of well-known crypto firms.

Finally, the Biden administration wants to look into creating a digital currency.

It comes as China has taken the lead in the development of central bank digital currencies, or CBDCs, with an increasing number of people utilizing smartphones to make payments and manage their affairs.

Biden has been tight-lipped about whether the United States should develop its own digital currency. Rather, he is urging the government to make CBDC research and development a “top priority.”

Last year, the Federal Reserve began looking into the possibility of issuing a digital dollar. The central bank issued a long-awaited research outlining the benefits and drawbacks of such virtual money, but it has yet to say whether the US should create one.

While CBDCs have the potential to significantly speed up payment settlement, governments are considering a variety of concerns about financial stability and privacy.

The new policy agenda eliminates a major source of uncertainty for a sector that has already seen multiple regulatory snags and scandals.

But does government intervention into how a decentralized currency can or can’t be used fundamentally alter the core idea of cryptocurrency itself?

The US Securities and Exchange Commission fined crypto start-up BlockFi a record $50 million earlier this year on charges that its retail lending product violated securities rules. The fine was part of a wider settlement of $100 million that included payments to 32 jurisdictions.

Coinbase ran into some problems with the watchdog as well, although it was able to avoid penalties. Coinbase was threatened with legal action by the Securities and Exchange Commission (SEC) for a programme similar to BlockFi’s that offered consumers interest payments on their crypto holdings. Following that, the corporation abandoned its ambitions for the service.

On Twitter, Jeremy Allaire, CEO of crypto startup Circle, wrote, “This is a watershed moment for crypto, digital assets, and Web 3, equivalent to the entirety of government waking to the commercial internet in 1996/1997.”

Investors in cryptocurrencies appeared to agree. Bitcoin prices soared beyond $42,000 on Wednesday as investors cheered the US executive move.

US Government Investigating the "Risks" & "Benefits" of Crypto

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Dow Bounces Back as Commodities Cool

Dow Bounces Back as Commodities Cool

Stocks rose sharply on Wednesday as lately soaring commodity prices eased,
despite the ongoing conflict in Ukraine.

The Dow Jones Industrial Average increased by 620 points, or 1.9%. The S&P 500 rose roughly 2%, while the Nasdaq Composite jumped 2.3 percent.

The rebound occurred after the market dropped for a fourth day on Tuesday, with the S&P 500 and Dow both dropping deeper into correction territory, and the Nasdaq Composite adding to its bear market losses.

This market shift is due to a drop in commodity prices, which has recently frightened stocks into beating a hasty retreat. During the battle in Ukraine, energy and agriculture items have soared, and some metals have seen significant advances.

In some cases the moves on some commodities (I’m looking at you Nickel) was so drastic that they halted trading. (When was the last time you saw that happening with commodities??)

The U.S. benchmark, West Texas Intermediate crude, was last down 4% to around $118, while Brent crude, the international standard, was down 3.5 percent to approximately $123.

Wheat futures fell 6.3 percent to $1,206 a bushel, while palladium continued to rise, jumping 3.8 percent to $3,082 per ounce. On Wednesday, silver, copper, and platinum all fell in price.

“Changes in commodity prices, particularly oil, continue to influence the equities market,” said Kathy Bostjancic, chief U.S. economist at Oxford Economics. “Trading will remain erratic, rallying when prices fall, but the likelihood of very high oil and non-energy prices puts a shadow over the outlook for economic activity and the stock market.”

On Wednesday, consumer-related companies soared after falling on expectations that increasing gas costs would stifle consumer spending. Nike gained 6%, while Starbucks gained 3.8 percent.

On Wednesday, airlines and cruise lines were also up. Carnival Corporation is up more than 7%, and United Airlines is up 7.2 percent.

Investors rotated out of bonds after huddling in fixed income for safety during the Ukraine conflict, causing Treasury prices to fall and yields to rise. The yield on the benchmark 10-year note increased by 3.7 basis points to 1.91 percent. A basis point is equal to 0.001% of a percentage.

As yields increased, bank stocks soared. PNC Financial was up 4%, while Wells Fargo was up more than 5%. Goldman Sachs and JPMorgan Chase were both up 3%.

After President Joe Biden declared an embargo on Russian fossil imports, including oil, in reaction to the country’s invasion of Ukraine, energy markets fell on Wednesday after a solid day Tuesday.

Pepsico’s stock jumped more than 1% after the soft drink giant said that it will stop selling its products in Russia, while it will continue to offer snacks and basics like infant formula. Aside from that, shares of dating service Bumble’s stock rose 37% after the company announced a profit and growth forecast that exceeded Wall Street’s expectations.

After a day of choppy trading, the major averages all ended the day down. The Dow Jones Industrial Average threw up a 585-point gain to close the day 184 points down, deepening its decline. The S&P 500 index fell 0.7 percent, putting it in correction territory. After entering bear market territory on Monday, the Nasdaq Composite dropped 0.2 percent.

Although it is unclear if the Federal Reserve will be able to achieve a soft economic landing, Ross Mayfield, an investment strategy analyst at Baird, believes the United States will be able to escape a recession.

“The labour market, consumer, and aggregate business sector strength in the United States should function as the weight to keep us out of recession in the short term,” he told CNBC. “Overall, volatility is expected to endure; there is a broad range of outcomes in Ukraine; but, the fundamentals of the US economy remain sound, especially if the Fed can raise rates without disrupting demand.”

Morgan Stanley thinks that the recent nickel jump has increased the cost of an electric vehicle’s input by $1,000.

The Labor Department said Wednesday that job opportunities outweighed available employees by roughly 5 million in January.

According to the Job Openings and Labor Turnover Survey, total vacancies actually decreased somewhat, falling to 11.26 million after a significant upward adjustment in December’s statistics.

Finally a bit of a relief to the recent skyrocketing of commodity prices…maybe these price decreases will eventually trickle down to the consumer.

Here’s hoping…

 

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Dow Bounces Back as Commodities Cool

S&P Rebounds & Oil Increases as Investors Jump Back Into The Markets

S&P Rebounds & Oil Increases as Investors Jump Back Into The Markets

Following the S&P 500’s worst day since October 2020, stocks fluctuated dramatically on Tuesday, as investors remained cautious due to continuing geopolitical uncertainties and rising commodities prices.

After surging 586 points to its session high, the Dow Jones Industrial Average recently traded up 100 points. After soaring as high as 1.8 percent, the S&P 500 gained 0.2 percent. After sliding into bear market territory the previous day, the Nasdaq Composite gained around 0.5 percent.

Investors are still assessing rising commodity prices and sluggish economic development as a result of Russia’s invasion of Ukraine. Rising costs for oil, gasoline, natural gas, and precious metals such as nickel and palladium are raising fears of a global recession as inflation rises.

On Tuesday, WTI crude oil soared as much as 7% to $128 a barrel after President Joe Biden said that the US will restrict Russian oil imports. Oil prices soared to a 13-year high of $130 a barrel to start the week.

Due to rising oil prices, the energy industry was a bright spot on Tuesday. Chevron and Exxon both saw their stock prices rise by 5% and 2.5 percent, respectively. Plus, when oil prices continued to increase, investors’ attention switched to alternate energy sources, solar and other renewable energy companies rose. Enphase Energy and SunPower both increased by 14% and 21%, respectively.

Airlines and cruise lines made strides as well. Delta Air Lines increased by 6%, while American Airlines increased by more than 9%. Southwest Airlines and United Airlines were both up 7%. Norwegian Cruise Line’s stock also increased by more than 7%.

Tuesday’s “bounce was a small victory that the low may be in,” said Jim Paulsen, chief investment strategist for the Leuthold Group. “However, it may have to be tested again later today or later this week,” he added.

Brent crude, the international benchmark, hit a high of $139.13 per barrel overnight Sunday before settling at $123.21 per barrel, its highest level since July 2008. Brent was recently trading at $126, up 2%.

Consumers’ wallets are already feeling the effects of the crude price increase. According to AAA, the national average for a gallon of regular gas rose to $4.173 on Tuesday. The previous high was $4.114, which was set in July 2008 and was not adjusted for inflation.

Other commodity prices have also begun to rise again. On Tuesday, nickel prices briefly surpassed $100,000 per metric tonne, setting a new high.

Palladium futures, a critical metal in the electronics industry, gained another 5% to $3.04 an ounce, while platinum futures jumped over 3% to $1,149.70 an ounce.

“Perhaps there’s some relief that only the US is immediately shutting off Russian oil/gas, whilst the UK and EU are implementing their plans over several quarters. Furthermore, while the majority narrative on Russia/Ukraine is pessimistic, the components for a ceasefire are coming together,” stated Vital Knowledge founder Adam Crisafulli.

Treasury rates were also considerably higher, with the benchmark 10-year note rising almost 10 basis points to 1.85 percent as investors sold Treasuries amid rising inflation worries. Yields move in the opposite direction of price.

The move followed a sharp sell-off on Wall Street, with the S&P 500 dropping about 3% for its worst day since October 2020. The blue-chip Dow fell over 800 points for the sixth time in six sessions, while the Nasdaq Composite, which includes many of the market’s top tech firms, fell 3.6 percent, sliding into bear market territory, down 20% from its November peak.

Investors remained on the lookout for new developments in the escalating global tensions. Ukraine claims that Moscow is attempting to exploit the cease-fire agreement by allowing only Ukrainian citizens to flee to Russia and Belarus.

Shell has apologized for buying cheap Russian oil and said that it will sell all of its hydrocarbon interests in Russia. Russia has warned that if Western nations impose an embargo on petroleum exports, prices may rise to $300 per barrel. Shell’s stock increased by 3% on Tuesday.

With rising inflation and the war in the Ukraine, costs and tensions continue to escalate.

 

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S&P Rebounds & Oil Increases as Investors Jump Back Into The Markets

Russia Threatens $300/Barrel Oil if The West Cuts Energy Supplies to Russia

Russia Threatens $300/Barrel Oil if The West Cuts Energy Supplies to Russia

In response to sanctions imposed,
Russia threatens that oil could skyrocket to $300/Barrel,
effectively crushing the European economy.

If governments follow through on threats to stop buying energy from Russia, Western countries might face oil prices of over $300 per barrel and the eventual shutdown of the main Russia-Germany gas pipeline, a senior minister said on Monday.

On Monday, oil prices rose to their highest level since 2008 after US Secretary of State Antony Blinken indicated the US and its European partners were considering blocking Russian oil imports.

“It is very evident that rejecting Russian oil would have disastrous effects for the world economy,” Russian Deputy Prime Minister Dmitry Rogozin said.

In a statement shown on state television, Minister Alexander Novak stated.

“The price increase would be unpredictably high. It would cost at least $300 per barrel.”

According to Novak, replacing the volume of oil received from Russia would take more than a year, and Europe would have to pay much higher rates.

“European leaders must be honest in their warnings to people and consumers,” Novak added.

“Go ahead and reject Russian energy supply if you want to. We’re prepared for it. We know where the volumes may be redirected.”

Novak said Russia, which provides 40% of Europe’s gas, was fully complying with its responsibilities, but that it would be absolutely within its rights to react against the European Union after Germany blocked the Nord Stream 2 gas pipeline’s certification last month.

“We have every right to take a matching decision and impose an embargo on gas pumping via the Nord Stream 1 gas pipeline in connection with… the imposing of a restriction on Nord Stream 2,” Novak added.

“We haven’t made such a choice yet,” he remarked. “However, European politicians’ words and charges against Russia drive us in that direction.”

JP Morgan estimates that Russia produces 12% of the world’s total supply of oil. But almost half of what Russia produces goes to Europe, verses only 3% going to the United States.

As for natural gas, Russia produces about 17% of the world supply and about 40% of that goes directly to Europe as well.

If the Russians were to cut off supply in retaliation, it would put all of Europe in an incredibly tough position.

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Russia Threatens $300/Barrel Oil if The West Cuts Energy Supplies to Russia

 

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Russian Stocks Pulled from Major Indexes

Russian Stocks Pulled from Major Indexes

Russian stocks are being yanked from the DJI and S&P 500
before trading next Wednesday

With Russia’s invasion of Ukraine, index powerhouse S&P Dow Jones Indices said Friday that all equities listed and or located in Russia will be removed from its benchmarks, further cutting the country off from the rest of the global economy.

The move will effectively strip Russia of its “emerging market” economic status.

S&P Dow Jones Indices said the elimination, which takes effect before the market opens next Wednesday, also affects Russian American depositary receipts (ADRs).

The company, which manages the Dow Jones Industrial Average and the S&P 500, also announced that Russia will be declassified as an emerging market and put in a separate category.

Russian military assaulted Europe’s largest nuclear power plant in Ukraine early Friday morning, igniting a fire at a nearby training site.

The attack was labelled a war crime by the US embassy in Kyiv.

Trading in three Russian ETFs — Franklin FTSE Russia ETF (FLRU), iShares MSCI Russia ETF (ERUS), and Direxion Daily Russia Bull 2X Shares — was suspended by the NYSE earlier Friday (RUSL). The halts were attributed to “regulatory concerns,” according to the exchange.

Since the geopolitical tensions erupted, exchange-traded funds that monitor Russian markets have been in a spiral. After losing 27.9% on Monday, the iShares MSCI Russia ETF fell 33.4 percent on Tuesday, its worst day since the fund’s launch in 2010.

In the meantime, the VanEck Russia ETF finished February with a loss of 54.9 percent, its worst month ever.

 

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Russian Stocks Pulled from Major Indexes