Brent crude declines 4.9% as President Biden prepares release of up to 1 million barrels a day from petroleum reserves
President Biden is expected to tap up to 180 million barrels of government oil reserves over the next six months to address the rise in energy prices in the aftermath of Russia’s invasion of Ukraine, the White House said Thursday.
That would be the largest release from strategic stocks in history, according to RBC Capital Markets. Global benchmark Brent crude for May delivery retreated 4.9% to $107.91 a barrel.
The US and allies have sought to bring down prices with strategic reserves previously, but effects have typically been short-lived. Members of the International Energy Agency agreed to release 60 million barrels on March 1, but Brent crude rose more than 7% that day.
“This seems more like a concerted, more significant effort, one which might have a bit more weight to it. For markets, this means less inflation and less pressure for central banks to be aggressive with interest-rate hikes,” said James Athey, an investment manager at Abrdn,
“It’s about relief, potentially taking away a destabilizing element” that is caused by high oil prices.
The yield on the benchmark 10-year Treasury note ticked down to 2.324% but rose for the quarter, recording the biggest gain since March 2021. Yields fall when prices rise.
Government bonds typically underperform in times of high inflation because the value of their fixed cash flows are eroded by rising prices.
The bond selloff stabilized in recent days likely due to timing, according to investors. At the end of the quarter, large asset managers commonly rebalance their portfolios.
A closely watched part of the US yield curve, the difference between the two-year yield and the 10-year yield narrowed to about 0.02 percentage point in trading on Thursday, from around 0.9 percentage point in early January. If it goes negative, the yield curve would be inverted.
“For us, that would be a recessionary indicator, but I don’t think it’s time yet to panic,” said Arun Sai, a multiasset strategist at Pictet Asset Management. “We’re on the verge of a meaningful signal, but equally things can turn around.”
The S&P 500 staged a rebound in recent days, but the broad index declined for the quarter. Shares of technology companies and more speculative bets have risen recently, reversing a trend from earlier in the year.
GameStop said it would seek a stock split Thursday afternoon, sending its shares up about 18% after-hours and continuing a run for the meme stocks. Tesla recently announced a similar move, sending its shares higher by 8% in just one session. The moves highlight a divergence in the market that has formed recently, with some corners of the bond market flashing a warning sign and other areas, like some speculative corners of the equity markets, showing more exuberance.
US consumer spending climbed 0.2% in February, fueled in part by higher prices but coming in below forecasts. Jobless claims, a proxy for layoffs, reached 202,000. That is a moderate increase from the previous week, which hit the lowest level since 1969, but still in line with economists’ expectations amid a tight labor market. Traders will be parsing the monthly jobs report on Friday.
Overseas, the pan-continental Stoxx Europe 600 edged down 0.9% and capped off its worst quarter since early 2020.
In Asia, most major benchmarks declined. The Shanghai Composite Index slid 0.4%, and Hong Kong’s Hang Seng Index fell 1.1%. Weaker-than-expected data from purchasing managers’ surveys in China for March weighed on sentiment, investors said.
-Gunjan Banerji contributed to this article.
Write to Anna Hirtenstein at [email protected]
Credit: www.Businesshala.com /