Risk-off sentiment and broader jitters in the market have triggered further flight into safe-haven assets such as gold, boosting prices.
US stocks plummeted on Monday amid continued uncertainty around the war in Ukraine, with the rot in equities catalysed by soaring energy prices and broader upsides in commodities.
The S&P 500 fell nearly 3% on Monday to see the benchmark index post its worst session since October 2020. The Nasdaq Composite closed 3.6% lower, dropping nearly 490 points to sink further into bear market territory. The Dow Jones Industrial Average closed 2.7% down, declining nearly 800 points to 32,817.38.
European shares also fall
Wall Street’s rout came after similar turmoil in the Asian and European markets.
In Europe, the Stoxx 600 index dropped 1.1%, while Germany’s DAX declined 2% and the French CAC shed 1.3%. UK’s FTSE 100 pared earlier losses to close -0.4%. Russia’s stock market remained closed for yet another session, entering a second week of the closure since first being halted two days after Russia invaded Ukraine.
Oil soars as flight into safe-havens help gold
Amid the uncertainty exacerbated by Russia’s war in Ukraine, investors’ apathy towards risk has seen energy prices soar over the past week.
Oil prices reached highs above $130 per barrel on Monday, with Brent crude oil reaching $137 per barrel. Meanwhile, US West Texas Intermediate crude oil pricked an old barrier to reach highs of $130.50 per barrel.
Gold prices broke to highs of $2,007 per ounce on Monday to see the precious metal hit its highest level since September 2020. A slowdown later in the session had it hold around $2,001 per ounce, with intraday gains well above 2%.
In cryptocurrencies, Bitcoin’s brief rally to highs near $45k last week was just that – short-lived. The crypto asset was back, tracking losses in the stock market, and even dipped to lows of $37,275 on Monday. The BTC-USD has pared some of the losses and currently trades above $38,190.
What next for markets?
The bleak outlook for financial markets and expected supply chain bottlenecks have economists and other market observers suggesting new highs in inflation readings. As stagflation projections mount, the spotlight turns to monetary policymakers, who could likely flip stances if inflation continues to rise at paces last seen nearly four decades ago.
Market observers say that if US inflation data scheduled for release later this week hits or beats the projected year-over-year surge of 7.9%, fresh fears could plunge stocks even lower. Oil price and gold could on the other hand see significant upwards movement.