[뉴욕=이데일리 김정남 특파원] The New York Stock Exchange fell once more in one day. Conflict has subsided as international oil prices soared to around $120 a barrel once more amid the unfavorable news of the prolonged war in Ukraine. The stock market is nervous as oil price surges might make it difficult for the Federal Reserve to make a soft landing in monetary policy.
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Oil prices soar to around $120 once more
According to Marketpoint on the 23rd (local time), the Dow Jones Industrial Average, a collection of blue chips on the New York Stock Exchange, closed at 34,358.50, down 1.29% from the previous trading day. The S&P 500 index, which focuses on large-cap stocks, fell 1.23% to 4456.24. The tech-focused Nasdaq Index fell 1.32% to close at 13,922.60. All three major indices fell once more within a day. In addition, the small-cap Russell 2000 index fell 1.68%.
The Chicago Options Exchange Volatility Index (VIX), also known as the Wall Street Fear Index, rose 2.83% to 23.59. It is still at the early to mid 20s level, which is not enough to dampen investor sentiment. However, the fact that the daily fluctuation range is large around the 30 line is an evaluation that proves that the two-seam is unstable.
The New York Stock Exchange has been under bearish pressure since the beginning of the day because of oil prices. On the New York Mercantile Exchange, the price of West Texas Intermediate (WTI) for May futures ended at $114.93 per barrel, up 5.2% from the previous day. It rose to $115.40 intraday. On the London ICE Futures Exchange, the price of May Brent crude rose to $122.34 per barrel during the day. It is an increase of close to 6%.
This is because concerns regarding supply shortages have risen once more. The Russian government said oil exports might drop sharply for two months following a typhoon destroyed the port of Novorossiysk in the Black Sea, the Financial Times (FT) reported, citing the TASS news agency. Russia expects two-thirds of its daily shipments to decline. That’s regarding 1 million barrels.
Crude oil exported through the Black Sea is extracted by the Caspian Pipeline Consortium (CPC). CPC extracts crude oil from an oil field on the Tengis Plain in western Kazakhstan and sends it to Novorosysk, a Russian port city on the Black Sea coast through a 1500 km pipeline. After that, the crude oil is transferred to ships and exported to countries around the world. According to the Russian side, the port was damaged, causing disruption to exports.
However, it is observed that Russia’s retaliation once morest Western sanctions lies behind it. The largest shareholder of CPC is the Russian government with a 24% stake. Chevron and ExxonMobil own 15% and 7%, respectively. This is a good structure for Russia to retaliate once morest the US. The FT said, “The US has not been able to confirm the situation at the port of Novorossiysk.” The US has imposed an embargo on Russian crude oil, but it is accepting CPC crude oil classified as Kazakhstan.
Some analysts say that Russian President Vladimir Putin has issued a strong warning ahead of US President Joe Biden’s European tour, especially in Poland, which borders Ukraine. The White House has announced that it will announce new sanctions once morest Russia during its European tour.
Steven Innes, manager of SPI Asset Management, said, “This NATO summit will be a watershed in the oil market.”
The sharp rise in international oil prices shook the entire financial market. The yield on the 10-year U.S. Treasury bond rose to 2.417% during the morning of the day, breaking through the 2.4% barrier. This is the highest figure since May 2019.
“We are still sensitive to what is happening in Ukraine,” said Susanna Streeter, senior analyst at Hargreaves Lansdowne. “The sudden rise in oil prices continues to put a burden on the stock price,” he said.
U.S. ‘soft landing’ growing doubts
European stock markets fell all at once. London’s FTSE 100 index fell 0.22% to close at 7460.63. The DAX30 index of the Frankfurt stock market in Germany fell 1.31% and the CAC40 index of the Paris stock market fell 1.17%, respectively.
Wall Street is paying particular attention to the fact that the unpredictable Ukraine crisis might make a soft landing for the Fed’s monetary policy difficult. Although still in the minority opinion, there are even Wall Street figures who say the Fed might raise the benchmark rate by 75 basis points above 50 basis points (1 basis points = 0.01 percentage points) in one meeting. This is the speed at which austerity itself might call for a recession. However, if the ultra-high oil price of more than $100 per barrel continues in the midst of this, further increasing inflationary pressure, the Fed’s action may not work.
President Putin’s recent aggressive move has reinforced these concerns. During a cabinet meeting on the same day, Putin announced that he would accept payment only in the Russian ruble, the Russian currency, when selling Russian natural gas to unfriendly countries such as Europe. In the meantime, I have mainly paid in euros, but they said that they would only accept rubles. In response, the German government immediately protested strongly in European countries, calling it a “violation of contract.” The cold reality is that there is no mode of reconciliation between the Western camp and Russia following the Ukraine crisis.
Edward Moya, senior market analyst at Oanda, a foreign exchange trading firm, said, “We expect energy prices to continue to rise due to uncertainty over geopolitical risks.”
