Oil prices fell on Monday as Ukraine and Russia prepared for more peace talks and new Coronavirus lockdown in China Raised the possibility of easing global energy demand.
Brent crude, the global benchmark, fell 5.5 percent to $114 a barrel after Ukrainian President Volodymyr Zelensky pledged to We declare neutrality And abandon a plan to join NATO if Russia withdraws its forces.
US West Texas Intermediate crude lost 5.8 percent to $107, as analysts pointed out that Chinese authorities cut communications between Shanghai and the rest of the country to contain the record outbreak of the Corona virus as also responsible for the declines.
“There is concern about weak demand from China and this automatically tells us about weak global demand for oil,” said Christian Keeler, head of economic research at Barclays. China is the world’s largest importer of oil and the second largest consumer of fossil fuels.
Lower oil prices helped ease the turmoil in US Treasuries, which were sold off earlier in the session as traders bet the US Federal Reserve will raise interest rates aggressively to counter rising inflation.
Higher energy costs have been a key component of rising global consumer prices, which reduce demand for fixed income securities such as Treasuries by lowering the attractiveness of the steady streams of interest payments they provide. Brent crude is still about 15 percent above its closing level on February 23, on the eve of the Russian invasion of Ukraine.
The yield on two-year Treasuries, which moves inversely to their price, rose as much as 0.11 percentage points in European trading to 2.4 percent higher, up more than 1.6 percentage points since the end of last year.
Then the yield reduced its advance to 0.04 percentage point in New York trading. The yield on the 10-year Treasury fell 0.04 percentage point to 2.45 percent, after exceeding 2.5 percent in previous trading.
Despite volatile trading in Treasuries, the US dollar held steady against other major currencies on Monday, reflecting continued bets on monetary policy tightening.
“The market is recording a spike in inflation, and central banks are being forced to respond aggressively, leading to an economic slowdown,” said Luca Paolini, chief strategist at Pictet Asset Management.
The five-year Treasury yield on Monday rose above the 30-year yield for the first time since 2006, before slipping back to a fraction below that of long-term bonds.
A so-called yield curve inversion of this type reflects concerns that the Fed’s attempt to fight inflation may, over time, lead to lower growth or even a recession.
The dollar rose 1.7 percent against the Japanese yen to buy 124.2 yen, the highest level since 2015 as the Bank of Japan took steps to maintain loose monetary policy while the Federal Reserve raises interest rates. The British pound fell 0.8 percent against the dollar to 1.308 dollars.
In stocks, Wall Street’s S&P 500 fell 0.4 percent, and the technology-focused Nasdaq Composite was down 0.1 percent. The European stock index Stoxx 600 rose 0.3 percent. Asian bourses were mixed, with Japan’s Nikkei 225 index closing 0.7 percent lower and Hong Kong’s Hang Seng Index rising 1.3 percent.
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