Risk aversion sentiment and broader market jitters sparked a renewed flight to safe-haven assets such as gold, driving prices higher.
U.S. stocks fell on Monday amid continued uncertainty around the war in Ukraine, with the stock rot catalyzed by soaring energy prices and broader commodity gains.
The S&P 500 fell nearly 3% on Monday to see the benchmark post its worst session since October 2020. The Nasdaq Composite closed down 3.6%, losing nearly 490 points to sink further into bear market territory. The Dow Jones Industrial Average closed down 2.7%, down nearly 800 points at 32,817.38.
European stocks also fall
The rout on Wall Street came after similar turbulence in Asian and European markets.
In Europe, the Stoxx 600 index fell 1.1%, while the German DAX fell 2% and the French CAC lost 1.3%. Britain’s FTSE 100 pared earlier losses to close -0.4%. The Russian stock market remained closed for another session, entering a second week of closure since its first stop two days after Russia invaded Ukraine.
Oil soars as flight to safe havens helps gold
Amid uncertainty heightened by Russia’s war in Ukraine, investor risk apathy has seen energy prices soar over the past week.
Oil prices hit highs above $130 a barrel on Monday, with Brent crude hitting $137 a barrel. Meanwhile, U.S. West Texas Intermediate crude broke an old barrier to hit highs of $130.50 a barrel.
Gold prices hit highs of $2,007 an ounce on Monday to see the precious metal hit its highest level since September 2020. A slowdown later in the session kept it around $2,001 an ounce. ounce, with intraday gains well over 2%.
In cryptocurrencies, Bitcoin’s brief rally to highs near $45,000 last week was only short-lived. The crypto asset was back, following losses in the stock market, and even dropped to $37,275 on Monday. BTC-USD has pared some of the losses and is currently trading above $38,190.
What future for the markets?
The gloomy outlook for financial markets and expected supply chain bottlenecks have economists and other market watchers suggesting new highs in inflation readings. As stagflation projections rise, the spotlight turns to monetary policymakers, who could likely change stance if inflation continues to rise at the rate last seen nearly four decades ago.
Market watchers say that if U.S. inflation data due out later this week reaches or exceeds the projected 7.9% year-over-year rise, renewed fears could drive stocks even lower. On the other hand, the price of oil and gold could experience a significant upward movement.