Putin’s retaliation to Western sanctions and soaring energy prices send global markets whipsawing
Russian President Vladimir Putin’s retaliation to sanctions and the possibility of the West banning Moscow oil and gas sent global markets whipsawing today.
London’s premier FTSE 100 index tumbled over two per cent during the first hour of trading, while the domestically-focused FTSE 250 index, which is more aligned with the health of the UK economy, plummeted 3.38 per cent to 18,732.31 points.
Both pared back losses, but still closed in the red.
US and European countries were mulling banning the import of Russian oil, driving commodity prices higher.
The rise in oil and gas prices since Moscow sent troops into Ukraine has intensified market concerns about historically high inflation being embedded into Western economies for much longer, raising the likelihood of stagflation sweeping throughout rich economies.
Brent Crude, one of the international benchmarks, soared over six per cent to hit $125 a barrel this morning.
Natural gas prices also climbed to a record high of £8 per therm. A year ago, the cost of securing gas was just 43p.
The sell-off extended into the Continent, with European equity markets suffering heavy blows during opening exchanges.
France’s Cac 40 closed down over one per cent, while Germany’s Dax 30 dropped 1.79 per cent.
The pan-European Stoxx 600 dropped 0.93 per cent.
President Putin told holders of Russian sovereign debt to expect interest payments in roubles.
Russia’s currency has plunged to record lows against the dollar, falling a further 20 per cent today, meaning investors in Moscow debt will likely suffer losses.
Higher inflation raises the prospect of central banks pushing through their series of rate hikes to tame price rises.
Elevated borrowing costs makes holding equities less attractive and generally weakens stock markets.