ASX rises after Jerome Powell says inflation ‘far too high’, EU split over Russian oil sanctions

Mining and energy stocks pushed the Australian market higher on Tuesday morning, while oil prices jumped 8% as European Union countries considered joining the United States in boycotting Russian oil.

As of 10:15 a.m. AEDT, the benchmark ASX 200 was up 1% to 7,349 points. Some of the top performers were Woodside Petroleum (+3.5pc), Rio Tinto (+3pc), Santos (+2.6pc) and Fortescue Metals (+2.5pc).

The greenback edged higher, dragging the Australian dollar below 74 cents US.

Meanwhile, overseas markets fell after US Federal Reserve Chairman Jerome Powell suggested that US interest rates could rise much faster than expected.

Wall Street ended a five-day winning streak after the Fed chairman made the remarks on Monday (local time), at the National Association of Business Economics conference.

The Dow Jones index closed down 0.6% at 34,553 points, the S&P 500 was slightly lower at 4,461 and the Nasdaq Composite fell 0.4% at 13,838.

Boeing shares fell 3.6% after one of its 737-800s, operated by China Eastern Airlines, crashed in southern China with no apparent survivors.

Meta’s share price fell 2.3% after a Moscow court branded the US social media company an “extremist organization”, upholding the decision to ban Facebook in Russia.

“A sacred progression” on inflation

Mr Powell said the Fed needed to act “quickly” to tackle “far too high” inflation, adding that larger than usual interest rate hikes could be rolled out if needed.

In particular, he added: “If we conclude that it is appropriate to act more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so. “

Regarding Mr Powell’s latest comments on inflation, Oliver Pursche, senior vice president of Wealthspire Advisors in New York, said: “Three months ago it was ‘transitional’, there is a month was ‘high’. That’s one hell of an evolution.”

Fed Chairman Jerome Powell announces more aggressive US interest rate hikes this year.(Reuters: Carlos Barria)

“And the market is trying to figure out what those statements mean in terms of interest rate hikes and whether that increases the likelihood of some 50 basis point hikes down the road,” Pursche added.

Last week, Fed policymakers raised interest rates (by 25 basis points) for the first time in three years and signaled that there could be six more rate hikes in 2022.

Fed funds futures now imply a 61% chance of a 50 basis point hike in key interest rates at the Fed’s next meeting in May (up from 52% before the text of the speech was released). of Mr. Powell).

Oil prices soar as Europe disagrees on sanctions

In oil markets, Brent crude jumped 8% to $116.53 a barrel as European Union foreign ministers disagreed on Monday on whether and how to impose sanctions on Russia’s lucrative energy sector following its invasion of Ukraine.

Targeting Russian energy exports, as the United States and Britain have done, is a choice that divides the EU of 27, which depends on Russia for 40% of its gas.

Some of those who want the EU to go further showed impatience with the pace of the talks after a meeting of EU foreign ministers in Brussels.

“Why should Europe give Putin more time to make more money from oil and gas? More time to use European ports? More time to use Russian banks not licensed in Europe? time to pull the plug,” said Lithuanian Foreign Minister Gabrielius Landsbergis. Twitter.

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Defense analyst warns Australia ‘too dependent’ on imported oil

Germany and the Netherlands have said the EU is dependent on Russian oil and gas and cannot isolate itself at this time.

“The question of an oil embargo is not a question of whether or not we want [it]but a question of how dependent we are on oil,” German Foreign Minister Annalena Baerbock told reporters.

“Germany matters a lot [of Russian oil]but there are also other member states that cannot stop oil imports overnight,” she said, adding that the bloc should instead work to reduce its dependence on Moscow for its energy needs.

Adding to oil market volatility, over the weekend attacks by the Iran-aligned Houthi group in Yemen caused a temporary drop in production at a Saudi Aramco refinery joint venture in Yanbu.

Saudi Arabia said on Monday it would not be responsible for any global oil shortages after the attacks.


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