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Business

Stocks rally pauses, bond markets ponder risks for U.S. economy

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  • Euro STOXX 600 falls 0.6%
  • U.S. bond market signals economic pain ahead
  • Treasury 10-year yields lower
  • Ukraine-Russia negotiations earlier buoyed stocks
  • Wall Street down

LONDON/NEW YORK, March 30 (Reuters) – The U.S. and European equities rally paused on Wednesday as investors took stock of economic and geopolitical risks, while oil prices jumped back around $4 on the prospect of more Russian sanctions.

The broad Euro STOXX 600 (.STOXX) fell 0.6% after three positive sessions that had taken the index back to levels reached before Russia invaded Ukraine.

By late morning, the Dow Jones Industrial Average (.DJI) had lost 0.18%, to 35,229.04, the S&P 500 (.SPX) was down 0.25%, and the Nasdaq Composite (.IXIC) was little changed.

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The MSCI world equity index (.MIWD00000PUS), which tracks shares in 50 countries, was also little changed.

The relative cheer among stock investors contrasted with the circumspection in the bond market, where some investors are betting aggressive tightening of policy by the U.S. Federal Reserve could harm the world’s biggest economy over the longer term.

“I’m very worried that U.S. equities do not price any risk of slowdown in the U.S. economy – that is extremely worrying,” said Ludovic Colin, a senior portfolio manager at Swiss asset manager Vontobel.

The widely tracked U.S. 2-year-10-year Treasury yield curve briefly inverted on Tuesday for the first time since September 2019.

Longer-dated yields falling below shorter ones indicate a lack of faith in future growth, with 10-year yields falling beneath 2-year rates widely viewed as a harbinger of recession.

Sebastien Galy, senior macro strategist at Nordea Asset Management, said fixed income and equity markets were diverging.

“Equity markets are overly optimistic and the fixed income markets are probably being overly pessimistic.”

An inverted Treasury curve has in recent decades been followed by a recession within two years, including the 2020 downturn caused by the COVID-19 pandemic.

Benchmark indexes in Frankfurt (.GDAXI) and Paris (.FCHI) lost 1.5% and 1.1% respectively, with London shares (.FTSE) up a touch at 0.19%.

U.S. yield curve inverts

A day after rising above 0% for the first time since 2014, Germany’s two-year bond yield was up six basis points at 0.01% – keeping the previous day’s highs in sight.

Shares rallied in Asia overnight after Ukraine proposed on Tuesday it adopt neutral status, a move seen by investors as a sign of progress in face-to-face peace negotiations. read more

On the ground, however, reports of attacks continued and Ukraine reacted with scepticism to Russia’s promise in negotiations to scale down military operations around Kyiv.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) jumped 1.46% to its highest in nearly a month, with most Asian stock markets in positive territory.

JAPAN IN FOCUS

The benchmark U.S. 10-year yield was last at 2.3762% , having risen as high as 2.557% on Monday for its highest since April 2019, as traders positioned themselves for quick-fire increases to U.S. interest rates.

The impact of rising U.S. yields played out elsewhere, dragging Japanese government bond yields in their wake in a threat to Japan’s ultra-loose monetary policy.

The Bank of Japan increased efforts to defend its key yield cap on Wednesday, offering to ramp up buying of government bonds across the curve, including unscheduled emergency market operations. read more

The widening gap between U.S. and Japanese yields has caused the yen to weaken sharply, but it managed to regain some lost ground on Wednesday.

The Japanese currency rose 0.9% to 121.80 per dollar , compared with Monday’s low of 124.3, amid concerns Japanese authorities might step in to bolster the yen.

Elsewhere in currency markets, the euro rose 0.6% to $1.1157, its highest in four weeks, supported by the Russia-Ukraine peace talks.

In energy markets, oil prices jumped around $4 on supply tightness and the growing prospect of new Western sanctions against Russia even as Moscow and Kyiv held peace talks.

Brent crude LCOc1 futures were up $3.96, or 3.6%, at $114.19, while U.S. crude rose 3.66% to $108.05 per barrel.

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Reporting by Tom Wilson in London, additional reporting by Dhara Ranasinghe and Alun John in Hong Kong
Editing by Bernadette Baum and Mark Potter

Our Standards: The Thomson Reuters Trust Principles.

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Business

Oil rebounds on tight supply, prospects of new Russia sanctions

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Workers walk as oil pumps are seen in the background in the Uzen oil and gas field in the Mangistau Region of Kazakhstan November 13, 2021. REUTERS/Pavel Mikheyev

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LONDON, March 30 (Reuters) – Oil prices jumped by more than $4 on Wednesday on supply tightness and the growing prospect of new Western sanctions against Russia even as Moscow and Kyiv held peace talks.

Brent crude futures were up $4.09, or 3.7%, at $114.32 by 1341 GMT, reversing a 2% loss in the previous session.

U.S. West Texas Intermediate (WTI) crude futures rose $4.17, or 4%, to $108.41 a barrel, erasing a 1.6% drop on Tuesday.

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Crude’s price recovery “suggests the oil market, at least, has a strong degree of scepticism about any ‘progress’ (in the peace talks),” Commonwealth Bank analyst Tobin Gorey said in a note.

The market saw a sharp sell-off in the previous session after Russia promised to scale down military operations around Kyiv, but reports of attacks continued. read more

“We would see an additional 1 million barrels per day of Russian production at risk if relations with Europe worsen and an oil embargo is put in place, although we still see this as unlikely,” consultancy JBC Energy said in a note.

The United States and its allies are planning new sanctions on more sectors of Russia’s economy that are critical to sustaining its invasion of Ukraine, including military supply chains. read more

Russia’s top lawmaker on Wednesday warned the European Union that oil, grain, metals, fertiliser, coal and timber exports could soon be priced in roubles, having previously demanded that “unfriendly” countries pay in roubles for its gas. read more

The oil market’s focus has turned to tight supply after the American Petroleum Institute reported crude stocks fell by 3 million barrels in the week ended March 25, triple the decline that 10 analysts polled by Reuters had expected on average.

Keeping the market tight, major oil producers are likely to stick to their scheduled output target increase of about 432,000 barrels per day when OPEC+ – the Organization of the Petroleum Exporting Countries and allies including Russia – meets on Thursday, several sources close to the group said. read more

OPEC Secretary General Mohammad Barkindo said OPEC+ participants should “stay the course” regarding its decisions. read more

However, oil prices face pressure from weakening demand in China owing to tightened mobility restrictions and COVID-19-related lockdowns in multiple cities including the financial hub of Shanghai. read more

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Additional reporting by Sonali Paul in Melbourne and Muyu Xu in Beijing; editing by Mark Potter and Elaine Hardcastle

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Business

Oil drops on positive signals from Russia-Ukraine peace talks

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Storage tanks are seen at Marathon Petroleum’s Los Angeles Refinery, which processes domestic & imported crude oil into California Air Resources Board (CARB), gasoline, diesel fuel, and other petroleum products, in Carson, California, U.S., March 11, 2022. Picture taken with a drone. REUTERS/Bing Guan

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  • Ukraine-Russia continue peace talks after two weeks
  • Russian negotiator calls talks constructive
  • Pipeline outage forces Kazakhstan to cut output by a fifth
  • OPEC+ expected to stick to modest output rise
  • Shanghai locks down, seen hitting China oil demand

LONDON, March 29 (Reuters) – Oil prices dropped on Tuesday, extending losses from the previous day after Russia called peace talks with Ukraine constructive and China’s new lockdowns to curb the spread of the coronavirus hit fuel demand.

Brent crude fell $4.55, or 4%, to $107.93 a barrel by 1210 GMT, and U.S. West Texas Intermediate (WTI) crude was down $4.64, or 4.4%, at $101.32. Both benchmarks lost about 7% on Monday.

Ukrainian and Russian negotiators met in Turkey for the first face-to-face talks in nearly three weeks. The top Russian negotiator said the talks were “constructive”.

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Ukraine proposed adopting neutral status in exchange for security guarantees at the talks, meaning it would not join military alliances or host military bases, Ukrainian negotiators said. read more

“Oil prices are under pressure again on expectations about peace talks between Ukraine and Russia, which could lead to an easing of sanctions …” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

Sanctions imposed on Russia over its invasion of Ukraine have disrupted oil supplies, driving prices higher. read more

Prices also came under pressure after new lockdowns in Shanghai to curb rising coronavirus cases hit fuel demand in China, the world’s biggest importer.

Shanghai accounts for about 4% of China’s oil consumption, ANZ Research analysts said. read more

Lockdowns have dampened consumption of transportation fuels in China to a point where some independent refiners are trying to resell crude purchased for delivery over the next two months, traders and analysts said.

“China’s zero-COVID policy is bringing some relief to the oil market, albeit involuntarily, which is very tight due to the supply outages from Russia,” said Commerzbank analyst Carsten Fritsch.

Oil prices rose almost $2 earlier in the day as Kazakhstan’s supplies continued to be disrupted and major producers showed no sign of being in a hurry to boost output significantly.

Kazakhstan is set to lose at least a fifth of its oil production for a month after storm damage to mooring points used to export crude from the Caspian Pipeline Consortium (CPC), the energy ministry said.

The producer group OPEC+ was also expected to stick to its plan for a modest rise in May at this week’s meeting, despite a surge in prices due to the Ukraine crisis and calls from the United States and other consumers for more supply. read more

The energy ministers of Saudi Arabia and the United Arab Emirates, key members of OPEC+, said the producers’ group should not engage in politics as pressure mounted on them to take action against Russia over its invasion of Ukraine. read more

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Reporting by Yuka Obayashi in Tokyo and Bozorgmehr Sharafedin in London; Additional reporting by Sonali Paul in Melbourne; Editing by Edmund Blair, Kirsten Donovan and Emelia Sithole-Matarise

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World

Russia and West at odds over gas payments in roubles

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Valves are pictured at the Atamanskaya compressor station, part of Gazprom’s Power Of Siberia project outside the far eastern town of Svobodny, in Amur region, Russia November 29, 2019. REUTERS/Maxim Shemetov.

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  • Russia to decide on gas payment mechanism by Thursday
  • EU countries still at odds on how to pay in roubles
  • G7 nations refuse to pay for Russian gas in roubles

March 28 (Reuters) – Russia said on Monday it will not supply gas to Europe for free as it works out methods for accepting payments for its gas exports in roubles but G7 nations refused the demand.

At a meeting of European Union leaders on Friday, no common position emerged on Russia’s demand last week that “unfriendly” countries must pay in roubles, not euros, for its gas in the wake of the United States and European allies teaming up on a series of sanctions aimed at Russia. read more

Concerns over security of supply were enhanced after the demand, with companies and EU nations scrambling to understand the ramifications.

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The Russian central bank, the government and Gazprom (GAZP.MM), which accounts for 40% of European gas imports, should present their proposals for rouble gas payments to President Vladimir Putin by March 31.

“We are not going to supply gas for free, this is clear,” Kremlin spokesman Dmitry Peskov told a conference call. “In our situation, this is hardly possible and appropriate to engage in charity (with European customers).”

In a interview aired later on Monday with the American public broadcaster PBS, when asked whether gas would be turned off for non-payers, Peskov replied: “No payment – no gas.”

But he added that Russia is yet to take a final decision on how to respond should European countries refuse to pay in the Russian currency.

Meanwhile, energy ministers from the Group of Seven industrialized nations rejected the rouble payment demands, Germany economy and climate protection minister Robert Habeck said after talks with his counterparts. read more

“All G7 ministers have agreed that this is a unilateral and clear breach of existing contracts,” he told reporters after a virtual conference with G7 energy ministers.

The ministers “underlined once again that the concluded contracts are valid and the companies should and must respect them … payment in roubles is unacceptable, and we call on the companies concerned not to comply with Putin’s demand,” he said.

ENERGY SECURITY

Dutch and British wholesale gas prices rose by up to 20% on Monday on concerns about Russian gas supply.

The EU aims to cut its dependency on Russian gas by two-thirds this year and end Russian fossil fuel imports by 2027. Russian gas exports to the EU were around 155 billion cubic metres (bcm) last year.

On Friday, the United States said it will work to supply 15 bcm of liquefied natural gas (LNG) to the European Union this year. read more

U.S. LNG plants are producing at full capacity and analysts say most of any additional U.S. gas sent to Europe would have to come from exports that would have gone elsewhere.

Russian lawmaker Ivan Abramov said a refusal by the G7 to pay for Russian gas in roubles would lead to an unequivocal halt in supplies, according to the RIA news agency.

Abramov sits on the economic policy committee of the Federation Council, the Russian parliament’s upper chamber.

Germany’s Habeck called Russia “an unreliable energy supplier.”

When asked about what happens if Russia stops gas deliveries, he added: “we are prepared for all scenarios and not only since yesterday.”

However, the EU would struggle to replace all Russian gas exports in a short period of time, experts said. read more

Russian gas deliveries to Europe on three main pipeline routes were stable on Monday, with the Yamal-Europe pipeline continuing to flow eastwards from Germany into Poland, operator data showed. read more

Russia’s Gazprom (GAZP.MM) said it that it was continuing to supply natural gas to Europe via Ukraine in line with requests from European consumers.

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Reporting by Reuters; writing by Nina Chestney;
Editing by David Evans and Stephen Coates

Our Standards: The Thomson Reuters Trust Principles.

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Business

Shanghai lockdown hurts oil, bonds and yen take a beating

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A man wearing a protective mask, amid the coronavirus disease (COVID-19) outbreak, walks past an electronic board displaying graphs (top) of Nikkei index outside a brokerage in Tokyo, Japan, March 10, 2022. REUTERS/Kim Kyung-Hoon

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LONDON, March 28 (Reuters) – Oil prices slid on Monday as a coronavirus lockdown in Shanghai fueled worries about weak demand, while the yen’s stomach-churning descent continued as the Bank of Japan stood in the way of higher yields.

World stocks were largely flat, holding their ground in the face of another brutal selloff in major bond markets.

Ten-year U.S. Treasury yields pushed decisively above the 2.5%-marker for the first time since 2019, two-year bond yields in the Netherlands and Belgium turned positive for the first time since 2014 and even Japanese yields defied central bank intervention to hit fresh six-year highs.

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The other eye-popping move came from the yen, which slid almost 1.5%.

China’s financial hub of 26 million people meanwhile told all firms to suspend manufacturing or have people work remotely in a two-stage lockdown over nine days. read more

The spread of restrictions in the world’s biggest oil importer saw Brent skid $4.35 to $116.33, while U.S. crude fell $4.5 or 4% to $109.38.

Although Chinese blue chips (.CSI300) shed 0.6% and Japan’s Nikkei (.N225) lost 0.7%, and U.S. stock futures eased , , weaker oil prices cheered European shares which were broadly firmer (.STOXX).

MSCI’s world stock index was flat, (.MIAPJ0000PUS), resilient in the face of a radically more hawkish Federal Reserve and surging bond yields.

Risk sentiment was helped by hopes of progress in Russian-Ukranian peace talks to be held in Turkey this week after President Volodymyr Zelenskiy said Ukraine was prepared to discuss adopting a neutral status as part of a deal.{nL2N2VU0EH]

“Sentiment has been surprisingly resilient in stock markets, which are buying positive headlines from the war in Ukraine,” said Jan von Gerich, chief analyst at Nordea.

“The repricing that continues at the short end of the U.S. yield curve is taking place really fast and without any consequences for Wall Street at the moment.”

Citi last week forecast 275 basis points of Federal Reserve tightening this year including half-point hikes in May, June, July and September.

YIELD SURGE

Expectations that the Fed could push harder and faster to tame inflation running at four-decade highs continued to batter sovereign bond markets.

Two-year Treasury yields were up around 10 basis points in London trade, having hit their highest levels since early 2019 at 2.41% . Ten-year yields also rose to new highs above 2.5% .

And one measure of the U.S. bond yield curve — the gap between five and 30-year Treasury yields — inverted for the first time since 2006 in a sign that recession risks are increasingly being priced in .

Timothy Graf, State Street’s head of EMEA macro strategy, said selling bonds felt like “the path of least resistance right now.”

“The Fed’s given no sign it will slow down, if anything they have ratcheted up the hawkish guidance,” he added.

Euro zone bond markets continued their move into positive-yield territory, while money market pricing suggested investors were now anticipating 60 bps worth of rate hikes from the European Central Bank by year-end versus 50 bps last week.

Australia’s 3-year bond yield rose to 2.386% , its highest level since 2014.

Japan’s 10-year government bond rose to a fresh six-year high of 0.25% , reaching the upper limit of the Bank of Japan’s policy band even after the central bank stepped into the market in efforts to rein it in.

The BOJ reinforced its super-loose policy by offering to buy as many bonds as needed to keep 10-year yields under 0.25%.

That saw the dollar rise to its highest since August 2015 at 123.82 yen , giving it a gain of over 7% for the month. Likewise, the resource-rich Australian dollar has climbed more than 10% this month to reach 93.20 yen .

The euro has lost about 2.3% on the dollar in the same period, but at $1.0954 is some way above the recent two-year trough of $1.0804.

In commodity markets, gold softened to $1,931 an ounce , down about 1.3%.

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Reporting by Dhara Ranasinghe, Editing by William Maclean

Our Standards: The Thomson Reuters Trust Principles.

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World

Oil slumps as Shanghai lockdown raises fears over drop in demand

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A worker holds a nozzle to pump petrol into a vehicle at a fuel station in Mumbai, India, May 21, 2018. REUTERS/Francis Mascarenhas

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  • Shanghai to lock down as COVID-19 cases spike
  • OPEC+ to meet on Thursday
  • More emergency releases of reserves expected

MELBOURNE/TOKYO, March 28 (Reuters) – Oil prices plunged about $4 on Monday as concerns over slower fuel demand in China grew after authorities in Shanghai said they would shut the country’s financial hub for a COVID-19 testing blitz over nine days.

The market kicked off another week of uncertainty, buffeted on one side by the ongoing war between Ukraine and Russia, the world’s second-largest crude exporter, and the expansion of COVID-related lockdowns in China, the world’s largest crude importer. read more

Brent crude futures slid as low as $116.00 a barrel and were trading down $3.88, or 3.2%, at $116.77 at 0131 GMT.

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U.S. West Texas Intermediate (WTI) crude futures hit a low of $109.30 a barrel, and were down $3.92, or 3.4%, at $109.98.

Both benchmark contracts rose 1.4% on Friday, notching their first weekly gains in three weeks, with Brent surging more than 11.5% and WTI climbing 8.8%.

“Shanghai’s lockdown prompted a fresh sell-off from disappointed investors as they expected such a lockdown would be avoided,” said Kazuhiko Saito, chief analyst at Fujitomi Securities Co Ltd.

He added the market had factored in the impact of a missile attack on a Saudi oil distribution facility last Friday.

“Still, as OPEC+ is less likely to raise oil output at a faster pace than the recent months, we expect the oil market to turn bullish again later this week,” he said.

Shanghai’s city government said on Sunday all firms and factories would suspend manufacturing or have people work remotely in a two-stage lockdown over nine days, after the city reported a new daily record for asymptomatic COVID-19 infections. read more

Sapping fuel demand further, public transport, including ride-hailing services, will also be suspended during the lockdown.

On Friday, Yemen’s Houthis said they launched attacks on Saudi energy facilities and the Saudi-led coalition said Aramco’s petroleum products distribution station in Jeddah was hit, causing a fire in two storage tanks but no casualties. read more

The Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, are due to meet on Thursday.

OPEC+ has so far resisted calls from major consuming nations, including the United States, to step up an output boost. The group have been raising output by 400,000 barrels per day (bpd) each month since August to unwind cuts made when the COVID-19 pandemic hit demand.

To help ease tight supply, the United States is considering another release of oil from the Strategic Petroleum Reserve that could be bigger than the sale of 30 million barrels earlier this month, a source said.

“Additional release, however, may cause fears of a shortage of already-lower inventories which will limit further release in the future,” Fujitomi’s Saito said.

Global stockpiles are at their lowest since 2014.

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Editing by Cynthia Osterman and Jacqueline Wong

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Business

World stocks set for consecutive weekly gains for first time in 2022

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A woman stands in front of a screen displaying Japan’s Nikkei share average, U.S. and other countries’ stock market indicators outside a brokerage in Tokyo, Japan December 19, 2018. REUTERS/Issei Kato

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LONDON, March 25 (Reuters) – World stocks are headed for a second consecutive week of gains for the first time in 2022 though sentiment was broadly cautious as markets evaluated the economic risks from the Federal Reserve’s policy tightening and Russia’s war in Ukraine.

Technology shares in Hong Kong (.HSTECH) led losers and weighed on the broader market after U.S. regulators said recent media speculation about an imminent deal that would stop hundreds of Chinese companies from being kicked off American stock exchanges was “premature”. read more

Even though global flash PMI data for March this week showed the world economy was broadly resilient, investors have turned increasingly bearish on the economic outlook. Barclays, for example, cut its world economic growth forecast this week to 3.3% while traders have ramped up short bets.

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Global bond markets were still in the grips of one of their worst selloffs in recent memory, while gauges of market volatility threw mixed signals. Nickel , the face of market volatility, climbed 9% on Friday after hitting the 15% daily trading limit in the previous two sessions.

“I think the passing of the quarter end and fiscal year end in Japan next week will give a cleaner read on the resilience of risk assets and currencies to the bear market in bonds and prospect of accelerated Fed tightening in May,” said Kenneth Broux, an FX strategist at Societe Generale in London.

Benchmark U.S. ten-year Treasury yields which have led the broader bond market selloff held at 2.34% on Friday after hitting a near three-year peak of above $2.41% this week. Yields have risen 75 bps in the past two weeks as traders have scrambled to revise their rate hike expectations.

While Treasuries remained on course for one of their worst quarterly routs since at least the early 1970s, the dollar has benefited from the widening interest rate differential story with the Japanese yen briefly plunging to a late 2015 low of 122 yen per dollar.

The broader dollar index took a breather on Friday but was on track for a small weekly gain.

Markets are expecting as many as 190 rate hikes for the remainder of the year after a 25 bps U.S. rate hike last week. Investors are assigning a 88% probability of a 50 bps rate hike in March.

Chicago Fed President Charles Evans was the latest U.S. policymaker to sound more hawkish, saying on Thursday the Fed needs to raise interest rates “in a timely fashion” this year and in 2023 to curb high inflation before it is embedded in U.S. psychology and becomes even harder to get rid of. read more

Demand for safe-haven assets including gold and the Swiss franc remained resilient as the conflict in Ukraine showed no signs of slowing. Ukrainian troops are recapturing towns east of the capital Kyiv and Russian forces who had been trying to seize the city are falling back on their overextended supply lines. read more

Spot gold remained elevated at $1,959 an ounce, steady on the day.

Overnight the three main U.S. stock indexes each rallied more than 1%, as investors snapped up beaten-down shares of chipmakers and big growth names and supported by a fall in oil prices.

Oil continued to slide a little on Friday, as the United States and allies considered releasing more oil from storage to cool markets. Brent crude fell 1.3% to $117.78 per barrel and U.S. crude down 1.6% to $110 a barrel, but prices were still very high by historic standards.

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Reporting by Saikat Chatterjee; additional reporting by Alun John in Hong Kong; Editing by Raissa Kasolowsky

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Business

Wall Street pushes Treasury yields, stocks higher

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  • U.S. stocks advance, echoing gains in Europe
  • 10-year Treasury yields hit highest level since 2019
  • Oil prices give back some gains
  • Gold dips, Bitcoin advances

BOSTON/LONDON, March 22 (Reuters) – U.S. stocks regained ground on Tuesday, while Treasury yields climbed higher and oil dipped, as investors adjusted their expectations for rate hikes following hawkish comments from the U.S. Federal Reserve.

The Dow Jones Industrial Average (.DJI) rose 281.07 points, or 0.81%, to 34,834.06; the S&P 500 (.SPX) gained 27.59 points, or 0.62%, to 4,488.77; and the Nasdaq Composite (.IXIC) added 87.88 points, or 0.64%, to 13,926.34.

Stocks gaining included banks potentially benefiting from higher interest rates such as Morgan Stanley (MS.N) and Wells Fargo & Co (WFC.N), and sports apparel giant Nike Inc (NKE.N), which advanced around 5.5% after it beat quarterly profit and revenue expectations. read more

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Fed Chair Jerome Powell said on Monday the central bank could move “more aggressively” to raise rates to fight inflation, possibly by more than 25 basis points (bps) at once. read more

Markets were recalibrating the higher possibility of a 50-bps hike. On Tuesday morning, money markets were pricing in an 80% chance of a 50-bps hike in May, although this dipped to 70% around midday.

At around 1345 GMT, the U.S. 10-year Treasury yield was at 2.366%, having hit its highest since 2019 .

RBC Capital Markets’ chief U.S. economist Tom Porcelli wrote in a note to clients that during the speech “it was easy to wonder if a 75bps hike or even going intra-meeting is possible.”

“Both outcomes seem incredibly extreme but when we hear Powell talk about inflation he comes off as incredibly anxious to us.”

Euro zone government bond yields also rose, with Germany’s benchmark 10-year yield hitting around 0.515% , its highest level since 2018.

Although Wall Street had closed lower on Monday after Powell’s comments, stock markets in Europe rose. The STOXX 600 was up 0.65%, having climbed high in recent sessions to reach a one-month high (.STOXX). London’s FTSE 100 was up 0.54% (.FTSE).

The MSCI world equity index, which tracks shares in 50 countries, was up 0.63% on the day (.MIWD00000PUS).

Matthias Scheiber, global head of multiasset portfolio management at Allspring Global Investments, said the pickup in stocks could be a case of investors buying the dip, but that growth stocks would struggle if the U.S. 10-year yield moves closer to 2.5%.

“We saw the sharp rise in yields yesterday and we see that continuing today on the long end, so that’s likely to put pressure on equities. … It will be hard for equities to have a positive performance.”

But JPMorgan said that 80% of its clients plan to increase equity exposure, which is a record high.

“With positioning light, sentiment weak and geopolitical risks likely to ease over time, we believe risks are skewed to the upside,” wrote JPMorgan strategists in a note to clients.

“We believe investors should add risk in areas that overshot on the downside such as innovation, tech, biotech, EM/China, and small caps. These segments are pricing in a severe global recession, which will not materialize, in our view.”

The conflict in Ukraine continued to weigh on sentiment. U.S. President Joe Biden issue one of his strongest warnings yet that Russia is considering using chemical weapons. read more

Oil prices lost some ground gained Monday following news that some European Union members were considering imposing sanctions on Russian oil – although Germany said the bloc was too dependent on Russian oil and gas to be able to cut itself off. read more

U.S. crude fell 1.08% to $110.91 per barrel and Brent was at $115.53, down 0.08% on the day.

The U.S. dollar index was steady at 98.38 , while the euro was up 0.2% at $1.103 . read more

Gold prices fell on Tuesday, pressured by the Fed chief’s hawkish approach to tackling inflation. Spot gold dropped 0.6% to $1,923.60 an ounce. read more

Leading cryptocurrency Bitcoin was up 4.3% at around $42,803, adding to its gains since its intraday low of $34,324 on Feb. 24 when Russia invaded Ukraine. read more

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Reporting by Lawrence Delevingne in Boston and Elizabeth Howcroft in London; editing by Jonathan Oatis

Our Standards: The Thomson Reuters Trust Principles.

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Business

Oil jumps as EU weighs Russian ban, Saudi refinery output hit

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A view of the Phillips 66 Company’s Los Angeles Refinery (foreground), which processes domestic & imported crude oil into gasoline, aviation and diesel fuels, and storage tanks for refined petroleum products at the Kinder Morgan Carson Terminal (background), at sunset in Carson, California, U.S., March 11, 2022. Picture taken March 11, 2022. Picture taken with a drone. REUTERS/Bing Guan

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  • EU to weigh Russian oil embargo, with Biden set to join talks
  • Saudi refinery output hit by Yemen Houthi attack
  • OPEC+ supply gap widens further as February compliance jumps
  • U.S. oil rigs down despite $100/bbl crude prices -Baker Hughes

SINGAPORE, March 21 (Reuters) – Oil prices jumped more than $3 on Monday, with Brent above $111 a barrel, as European Union nations consider joining the United States in a Russian oil embargo, while a weekend attack on Saudi oil facilities caused jitters.

Brent crude futures climbed $3.74, or 3.5%, to $111.67 a barrel by 0739 GMT, adding to a 1.2% rise last Friday.

U.S. West Texas Intermediate (WTI) crude futures rose $3.98, or 3.8%, to $108.68, extending a 1.7% jump last Friday.

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Prices moved higher ahead of talks this week between European Union governments and U.S. President Joe Biden for a series of summits that aim to harden the West’s response to Moscow over its invasion of Ukraine.

EU governments will consider whether to impose an oil embargo on Russia. read more

Early on Monday, Ukraine’s deputy prime minister, Iryna Vershchuk, said there was no chance the country’s forces would surrender in the besieged eastern port city of Mariupol. read more

With little sign of the conflict easing, the focus returned to whether the market would be able to replace Russian barrels hit by sanctions.

“A Houthi attack on a Saudi energy terminal, warnings of a structural shortfall in production from OPEC, and a potential European Union oil embargo on Russia have seen oil prices jump in Asia,” OANDA’s senior analyst Jeffrey Halley said in a note.

“Even if the Ukraine war ends tomorrow, the world will face a structural energy deficit, thanks to Russian sanctions.”

Over the weekend, attacks by Yemen’s Iran-aligned Houthi group caused a temporary drop in output at a Saudi Aramco refinery joint venture in Yanbu, feeding concern in a jittery oil products market, where Russia is a key supplier and global inventories are at multi-year lows. read more

The latest report from the Organization of the Petroleum Exporting Countries and allies including Russia, together called OPEC+, showed some producers are still falling short of their agreed supply quotas.

OPEC+ missed its production target by more than 1 million barrels per day (bpd) in February, three sources told Reuters, under their pact to boost output by 400,000 bpd each month as they wind back sharp cuts made in 2020. read more

The two OPEC countries with the capacity to instantly raise output, Saudi Arabia and the United Arab Emirates, have so far resisted calls from major consuming nations to step up production faster to help drive down oil prices.

U.S. energy firms are also struggling to keep the number of active oil rigs up, despite strong prices. read more

The poor supply outlook and high prices prompted the International Energy Agency to outline ways on Friday to cut oil use by 2.7 million bpd within four months, from car-pooling to lower speed limits and cheaper public transport. read more

That would help offset the 3 million bpd of Russian crude and products that the IEA estimated would be off the market by April. read more

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Reporting by Sonali Paul in Melbourne and Florence Tan in Singapore; Editing by Shri Navaratnam and Clarence Fernandez

Our Standards: The Thomson Reuters Trust Principles.

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Chevron begins replacing workers ahead of California refinery strike

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Chevron Corp’s refinery is shown in Richmond, California August 7, 2012. REUTERS/Robert Galbraith

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March 20 (Reuters) – Chevron Corp began turning over some operations at a California oil refinery to replacement workers on Sunday ahead of a United Steelworkers strike set to begin shortly after 12 a.m. PDT on Monday.

A union official said it had notified Chevron of its intent to begin a strike at the plant outside of San Francisco after negotiations failed to reach agreement on a new labor contract.

The existing contract at the Richmond, California, refinery expired Feb. 1. Both sides had agreed to a rolling extension that was not renewed by the union after workers rejected the latest offer.

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The 245,000 barrel-per-day plant is the second-largest refinery in the state, employs more than 500 union-represented workers and produces gasoline, jet fuel and diesel fuel.

“It’s disappointing that Chevron would walk away from the table instead of bargaining in good faith,” said Mike Smith, chair of the USW’s National Oil Bargaining Program.

Chevron is committed to continuing to negotiate toward an agreement, a spokesperson said in a statement on Sunday.

The San Ramon, California-based company was “prepared to continue normal operations safely and reliably to provide the energy products that are needed by consumers,” the spokesperson added.

California has some of the highest fuel prices in the nation with a gallon of unleaded regular gasoline on Sunday selling for $5.847 and a gallon of diesel for $6.258, according to motorist group AAA.

A Chevron turnover team began taking control of refinery operations manned by union workers on Sunday afternoon ahead of the strike deadline, according to a person familiar with the matter.

The USW and U.S. refiners last month reached a national agreement that provides a 12% pay raise over four years to the union’s about 30,000 members at oil and chemical companies. Each local union separately negotiates a contract covering plant-specific issues, and Richmond workers have twice voted down Chevron proposals. read more

On Saturday, the union had advised machinists to go to the refinery and remove their personal tools before the contract extension expires.

Union members have twice voted to reject contract proposals put forward by Chevron. The last vote, completed on Saturday, was overwhelmingly against what was called the company’s last, best and final offer, according to messages posted on-line by USW Local 12-5.

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Reporting by Gary McWilliams, additional reporting by Erwin Seba; Editing by Will Dunham and Diane Craft

Our Standards: The Thomson Reuters Trust Principles.

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