Ukraine-Russia - Ripping New Volitility in Markets

 

MARKETS  Tues Mar 8   (one Day Results)

Nasdaq 12,830.96 -3.62%

S&P 4,201.09 -2.95%

Dow 32,817.38 -2.37%

10-Year 1.772% +4.0 bps

Bitcoin $38,104.65 -2.61%

Moderna $126.46 -7.33%

*Stock data as of market close, cryptocurrency data as of 5:00pm ET. Here's what these numbers mean.

Markets: The war in Ukraine delivered a triple whammy to stocks yesterday. The Nasdaq entered a bear market (20% off its record high), the Dow entered a correction (down 10%), and the S&P suffered its worst single-day drop since October 2020. Because we have to pick on one company, let’s go with Moderna, which has lost more than 50% of its value this year as investors got over their crush on Covid stocks. Ukraine: Key US lawmakers from both parties agreed to a bill that would ban Russian oil imports to the country. A US ban on Russian oil would be a big deal, but keep in mind that the US only depends on Russia for 8% of its petroleum product imports—a European embargo (which does not seem to be in the works) would be the real whopper. Commodities, which don’t necessarily make for a great first-date conversation topic but are necessary for daily life, did their best meme stock impression yesterday with price swings of historic proportions. Nickel, for instance, had its biggest daily dollar gain on record. What’s going on? Commodities are spiking over concerns that the war in Ukraine will result in a dire shortage of critical materials. Because of port closures and sanctions, Russia and Ukraine have stopped shipping goods that are used around the globe for food, fuel, and manufacturing. Here’s how the war in Ukraine is unleashing chaos across global markets. Energy As rumors of a potential embargo on Russian energy swirled earlier in the day, European natural gas prices skyrocketed to hit 345 euros per megawatt-hour. That might mean nothing, until you realize that prices had never topped 30 euros before last year, or 200 before last Friday. Oil prices continued to push higher, spelling even more financial pain for Americans at the gas pump. Gas prices in California have increased 51 cents in just the past week to an average of $5.34. Food Wheat prices have ballooned more than 50% since the war began to record highs, which is apparently what happens when nearly one-third of the world’s total wheat exports (for which Ukraine and Russia are responsible) are knocked offline. Pricey wheat will disproportionately affect lower-income nations, such as Egypt and Indonesia, that depend on Ukrainian and Russian grains. But soaring food prices don’t just make dinner more expensive—they also destabilize societies. Protests erupted around the world the last time wheat prices were nearly this high, in 2008. Metals Nickel’s price jump of 76% yesterday was one of the “most extreme moves” in metal markets history, Bloomberg wrote. Russia is a leading producer of nickel, which is a key ingredient for EV batteries and is also used to make stainless steel. Adding to price pressures is that nickel was already in short supply: Two years ago, Elon Musk urged companies to “please mine more nickel.” Bottom line: Another massive supply shock is thwacking the global economy just as it was beginning to recover from the Covid Everything Shortage. However, because this supply crunch isn’t accompanied by a boom in economic growth, it increases the risk of stagflation and, ultimately, recessions.—NF