Last week’s global financial markets in brief- week 1 February
As per the weekly report released by the Arab Federation of Capital Markets, US Treasury yields moved higher over the previous week, to exceed 2%, with investors evaluating safe-haven assets amid the escalated geopolitical tensions between Russia and Ukraine.
In parallel, oil prices ended higher on Friday at fresh seven-year highs, as escalating fears of an invasion of Ukraine by Russia, a top energy producer, added to concerns over tight global crude supplies.
Meanwhile, gold price hit an 8-month high, as heightened geopolitical tensions prompted investors to opt for safe-haven bullion.
Headline inflation data shows more pressure on prices than expected
U.S. Treasury yields climbed last Thursday, with the benchmark 10-year rate exceeding the 2% level, after key inflation data showed hotter-than-expected price pressures, as per the head of research Dr. Fadi Kanso.
The yield on the 10-year Treasury note jumped 12 basis points to about 2.05%, the first time that the benchmark rate reached 2% since August 2019.
In fact, the consumer price index, which measures the costs of dozens of everyday consumer goods, rose 7.5% compared to a year ago. That compared to Dow Jones estimates of 7.2% for the closely watched inflation gauge, marking the biggest annual increase in inflation in 40 years.
The US dollar index is at its highest level in a month
In parallel, the U.S. dollar index reached a one-month high, with investors anxious over tensions in Ukraine and as St. Louis Federal Reserve President James Bullard reiterated calls for a faster pace of U.S. Federal Reserve interest rate hikes.
As such, the US dollar jumped to a five-week high of 116.34 yen. The greenback oscillated against other currencies before turning broadly firmer. The euro was last down 0.2% at $ 1.14 and the Australian and New Zealand dollars each dropped about 0.3%.
Wall Street closes lower
Wall Street stocks ended sharply lower last Friday for the second straight session, as investors were troubled about deepening tensions between Russia and Ukraine.
Nine of the 11 major S&P 500 sector indexes declined, led by technology, down 3%, and consumer discretionary, down 2.8%. The energy sector index surged 2.8% as oil prices hit seven-year highs.
In parallel, Asian share markets fell on Friday, as MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.76%, with most markets in the red, though a resurgence in property stocks helped greater China markets.
Oil prices near the $100 mark
Oil prices surged to their highest in more than seven years as Ukraine’s President said he had heard that Russia could invade the country last Wednesday.
Russia is one of the world’s largest oil-and-gas producers, and fears that it could invade Ukraine have driven the rally in oil closer to the $100 per barrel mark. In fact, oil prices jumped on Wednesday, after OPEC+ stuck to its planned output increase despite pressure from top consumers to raise production more quickly.
In addition, oil prices rose on Friday after the International Energy Agency (IEA) said oil markets were tight but were still heading for weekly losses on inflation worries.
As such, Brent crude rose to $96.5 a barrel, after touching its highest since September 2014. US West Texas Intermediate (WTI) crude rose to $95.5 a barrel, after hitting $ 95.8, in September 2014.
Gold prices at their highest in 2 months
Gold prices jumped last Friday to a near two-month peak as concerns over surging inflation and escalating tensions between Russia and Ukraine lifted demand for the safe-haven metal. Spot gold rose to $1,855 per ounce, its highest level since Nov. 19.
Gold is supported through the inflation channel because of higher crude oil prices and through the risk aversion channel because of lower stocks. In fact, the gold market seems to be ignoring major central banks right now because investors are lost in the fog of war.