The growing threat of an armed conflict in Ukraine fueled stock market distrust on Monday. the Bedroom 40 ends down more than 2%, at 6,852.20 points, while the rise in energy prices worsens inflation and poses a risk to economic growth. In the United States, the yield curve flattened further today (the difference between the ten-year interest rate of 2% and the two-year interest rate of nearly 1.6% is at most low since the summer of 2020, at just over 40 basis points), reflecting recession concerns.
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Beyond the simple fact that businesses need calm to thrive, the danger of a war involving Russia poses a risk to oil and gas supply. Russia, which plays a leading role in world markets, exports about 5 million barrels every day, 4 of which go to Europe. Also, in the event of a sanction from the West or in the event of the destruction of an oil pipeline, as a result of a war, there would be less crude on the market.
Almost $100 a barrel
While the price of gas rose this morning by 6% in Europe on the benchmark market of the Netherlands, that of Brent was still approaching a little more than 100 dollars a barrel in London; it crossed the $96 threshold for the first time since 2014.
“The greater the prospect of a Russian invasion of Ukraine, the greater the risk of economic sanctions from the United States”, summarizes the analyst Dan Wang, of the research firm GaveKal Research. Sanctions on an unprecedented scale are being considered by the Americans and the Europeans. In addition to the traditional ones against leaders, financial institutions and oil and gas exports, the United States “consider extraterritorial export controls of the type used against Chinese telecom giant Huawei”continues Dan Wang, which “could[t] hurt businesses around the world, not just those in Russia. »
At the lowest of the day, the Cac 40 plunged 3.6%, the lowest in three weeks. The losses were reduced after the Russian Foreign Minister proposed to the West, around 1:30 p.m., to continue diplomatic efforts. A position that President Vladimir Putin endorsed on Russian television. This weekend, the national security adviser of the United States, Jake Sullivan, had repeated that an invasion of Russia in Ukraine could occur at any time. Remarks that followed discussions between Presidents Biden and Putin, which showed no sign of progress.
Tensions were at their height this morning when Kiev indicated that its membership of the European Union and NATO remained a priority, which is intolerable for Moscow.
On the Paris Stock Exchange, all the components of the Cac 40 close in the red with the exception of crossroads (+0.38%). Banks, which borrow in the short term to lend in the long term, by being remunerated on the rate spread, are among the biggest falls. Societe Generale dropped by 6% and BNP Paribas by almost 5%.
The Fed “in trouble”
After the publication on Thursday of the latest inflation figures in the United States (7.5% in January) – which now exceeds that of Mexico – the stock market fears that the Fed, the American central bank, will urgently raise and at a forced march the key interest rate (Fed Funds), the benchmark for the entire US economy.
The Board of Governors of the Fed meets from 5:30 p.m. (Paris time) in Washington. It is not a meeting of the monetary policy committee (FOMC) since the presidents of the federal branches of the central bank are not invited. But a decision on the rates is possible since it is in the prerogative of the board of governors to act on the discount rate (the rate at which the banks borrow from the Fed). This rate is one of the three levers used indirectly by the Fed to intervene on the Fed Funds rate (rate at which banks lend money to each other overnight), with open-market operations ( prerogative of the FOMC) and the reserve requirement ratio (Board of Governors).
The Fed Funds rate is now fluctuating between 0 and 0.25%, at an all-time low. To fight inflation, St. Louis Fed Chairman James Bullard told US financial news channel CNBC today that he still believes the Fed, to ensure its credibility, had to act fast and strong. The Fed will be ” in a bad situation “ if inflation does not moderate in the second half. Last week, the same James Bullard, voting member of the FOMC, said he was in favor of raising the key rate by 100 basis points by July (within a range of 1-1.25%). Also voting this year, Kansas City Fed President Esther George, on the other hand, told the wall street journal that it was too early to say whether a 50 basis point increase in March was warranted. She says she is opposed to action on the key rate between two conventional meetings, the next one being scheduled for mid-March.