Oil surged above $100 a barrel on Thursday as attacks on shipping in the Middle East intensified, sending global bond yields to multi-year highs and pulling U.S. and European stocks lower. The European Central Bank raised interest rates for the second time this year, while U.S. producer price data added to bets the Federal Reserve will hike rates next week.
Oil jumps on shipping attacks
U.S. crude futures jumped 6% on Thursday, joining Brent above $100 a barrel, as the biggest spike in attacks on shipping since the Iran war began fed worries about further disruptions to already tight supplies. U.S. diesel hit a record $5.98 a gallon, while European natural gas prices reached their highest level since 2022.
The energy shock rippled through other commodities. Comex copper fell 5% and gold slipped 1%, even as investors weighed the war's broader economic fallout.
Bond yields hit multi-year highs
The rout in global bond markets deepened. Long UK gilt yields climbed to their highest level in nearly 30 years, long French yields reached levels not seen in more than 20 years, and the 30-year U.S. Treasury yield rose to its highest since 2007. The U.S. 2-year yield jumped 15 basis points on Thursday alone.
As a result, the Dow and S&P 500 each fell 0.6% and the Nasdaq dropped 1%. Nine of eleven S&P 500 sectors declined, and utilities fell 1% and materials 1.5%, with Baker Hughes and Freeport-McMoRan both down 6.5% and IBM off 2.5%, though Apple gained 3.5%.
ECB tightens as Fed decision looms
The European Central Bank raised rates on Thursday. According to Reuters, ECB President Christine Lagarde said inflation will be "longer lasting" than she and her colleagues had anticipated. Rates markets are now fully pricing in three more quarter-point ECB rate rises by the middle of next year.
In the U.S., producer price data released Thursday were not "hot," but were warm enough that rates markets moved to price a 70-30 probability of the Fed raising rates next week. One-year U.S. inflation swaps have climbed toward 2.70%, up almost 100 basis points since early August. Friday's U.S. CPI report now carries outsized weight for the Fed's next move.
Source: Investing.com (Reuters)
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