Risk assets lurched lower once more following reports of an attack on a nuclear plant in Ukraine, while commodities continued their rise amid the inflationary impacts of the conflict.
Oil spiked to almost $120 per barrel on the news before settling back to around $112 – but still up by 44% in the year to date – as news emerged that an increase in output following a deal between the US and Iran is not close to materialising. Meanwhile, there were further spikes in commodities such as nickel, copper and aluminium as the escalation of sanctions on Russia threatened general supply chains.
The current turmoil leaves central banks somewhere between a rock and a hard place. The Federal Reserve , for example, needs to weigh the likely economic damage to growth against the inflationary pressure of commodities. Chairman Powell indicated earlier in the week that an interest rate rise of 0.25% rather than 0.5% was imminent, which was initially of comfort to investors, but has added that it was “too early to say if Russia changes the rate path.”
Further confirmation of a…
