Global shares recover losses in volatile trade, as surging commodities fan fears of 1970s-style stagflation
- Global shares edged up Tuedsay, paring overnight losses in volatile trade, as
commoditiescontinued to surge. Russiawarned of oil hitting $300 a barrel, and said it could cut off European natural gas supply if the West bans its energy exports.
Global shares pulled off this week's multimonth lows on Tuesday, but trade was volatile as soaring commodity prices threatened to overwhelm already-fragile economic growth.
The latest potential sanction on Russia over the
Meanwhile, worries about Russian supply were fueling a searing rally in nickel, which has trebled in just three trading days to new record highs.
US stock futures pared overnight losses, while those on the S&P 500 and the Dow Jones edged up by 0.2%, having fallen by almost 1% earlier. Those on the Nasdaq 100 edged into positive territory, having shed over 1.0% in Asia trading.
In response to the potential oil embargo, Russia has threatened to cut natural gas supplies to Europe, and warned oil could hit $300 a barrel should any restrictions on its 7 million barrels per day in exports come into force.
Economies around the world were already facing rising price pressures, and central banks have had to rapidly switch into interest rate-hike mode to ward off a more damaging spike in
"This price jump, along with that seen in other commodities, is not only raising concerns about price pressures, but also about the stiff headwinds that it will pose to economic growth, as input prices surge causing companies to reduce production," Caxton FX strategist Michael Brown said.
"As a result, the word 'stagflation' seems to be getting thrown around more and more, with echoes of the '70s growing louder, especially as we're now dealing with a commodity shock on top of everything else," he added.
"Overall, it's fair to say that if commodities stay at these elevated levels, it will make life even more difficult for central banks, who will have to try and thread the needle between preventing inflation becoming entrenched without aggravating the slowdown with higher interest rates," Deutsche Bank strategist Jim Reid said.
The dollar rallied sharply against trade-sensitive emerging currencies, like the Brazilian real, the Mexican peso and the Thai bhat, gaining between 0.5 and 1.0%.
"The dollar has continued to strengthen as global liquidity conditions deteriorate, and energy prices have spiked again," ING strategists Chris Turner and Francesco Pesole said in a daily note.
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