Jakarta, CNBC Indonesia – The United States (US) stock market plunges at the open trading Monday (7/3/2022), after the prospects for peace between Ukraine and Russia became increasingly blurry which triggered a spike in world crude oil prices.
The Dow Jones Industrial Average fell 250 points (-0.8%) at 08:30 local time (21:30 WIB) and after 30 minutes it became minus 323,89 points (-0,96%) ke 33.290,91. The S&P 500 is down 40,95 points (-0,95%) ke 4.287,92 and the Nasdaq sinks 142,56 points (-1,07%) ke 13.170,87.
The price of US benchmark crude oil, West Texas Intermediate (WTI) jumped 1.5% to US$ 117 per barrel after briefly touching US$ 130/barrel. Meanwhile, global benchmark Brent oil shot to the level of US$ 121/barrel, after briefly touching the level of US$ 139/barrel or the highest level since July 2008.
The rally happened after US Secretary of State Antony Blinken told NBC on Sunday that Washington was “very active in discussions” with governments in Europe about Russia’s planned oil and gas blockade.
US House Speaker Nancy Pelosi said in an official letter to Democrats that she was “looking for strong legislation” to ban imports of Russian oil – which she believes will further isolate Russia from the global economy.
Last week Ukraine accused Russia of violating the ceasefire by re-launching attacks. On the other hand, Russia accused the Ukrainian government of not allowing civilians to go out through the agreed route because they were using them as shields.
Fuel prices also soared to their highest level since 2008, with the national average in the US reaching US$4.06/gallon, according to the AAA. This triggers concerns that world inflation will rise.
Yield (yield) US government bonds (US Treasury) with a tenor of 10 years, which is the market reference, also rose 4 basis points (bp) to 1.76%. Ascension yield indicates a depressed price because the demand for risk-free assets (in this case government bonds) declines.
However, banking stocks that should have benefited when interest rates rose fell. Shares of Citigroup plunged 3.9% and Bancorp plunged 3%, indicating that market anxiety is more about the economic pressures from the war that could hit the financial sector.
Last week, the Dow Jones closed down 1.3%, while the Nasdaq sank up to 2.8%.
“The stock market is struggling with supply pressures for commodities including especially oil prices and is concerned that this could turn into stagflationary pressures and not just inflation,” said Kathy Bostjancic, chief economist at Oxford Economics. CNBC International.
CNBC INDONESIA RESEARCH TEAM
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