Title: Oil leads mad rush to resources, stagflation a risk
Mar 02, 2022 11:36PM ET
Oil prices rose sharply on Thursday as the war in Ukraine sparked a sharp outflow of funds, an ominous sign for global inflation, while Asian stocks supported Wall Street after encouraging comments from the Federal Reserve.
The price of Brent crude has surpassed $117 a barrel and risen almost 20% this week, while all commodities, from coal to natural gas to aluminum, have come under fire as Western countries tighten sanctions against Russia.
The flight to commodities pushed commodity-rich Australian stocks 0.9% higher, while Indonesian stocks were just below record highs.
Japan's Nikkei was up 0.8%, and the MSCI Asia-Pacific ex-Japan index was up 0.6%.
MSCI stepped up its economic isolation of Russia by deciding to exclude the country from its emerging markets index, and FTSE Russell said Russia would be excluded from all its indices.
Fitch Ratings downgraded Russia's credit rating by six notches to junk status, saying there were doubts the country would be able to pay its debts.
The S& P 500 futures fell after rising overnight, and the Nasdaq futures fell 0.1 percent.
Euro Stoxx 50 futures fell 0.2 percent, and analysts at JPMorgan issued a stern warning to their clients.
Fed Chairman Jerome Powell said on Wednesday that interest rates were only likely to rise by 25 basis points this month and that the war in Ukraine had made the outlook "very uncertain".
Futures reacted by assessing the possibility of a half-basis point increase later in March.
However, Powell warned that the Fed might need to raise rates more aggressively if inflation continues to rise. This took away some of the appeals of Treasuries as a safe haven, and the 10-year bond yield returned to 1.85%, up from Tuesday's two-month low of 1.682%.