(Bloomberg) — Stocks slid Monday along with European and U.S. equity futures amid fears of an inflation shock in the world economy as crude oil soared on the prospect of a ban on Russian supplies.
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S&P 500 and Nasdaq 100 contracts fell over 1% and European futures some 2.7%. An Asian share index was on course for a bear market — a drop of more than 20% from a February 2021 peak. Brent crude was up about 10% after briefly touching $139 a barrel. Palladium and copper hit all-time highs.
Secretary of State Antony Blinken said Sunday the U.S. and its allies are looking at a coordinated embargo following Russia’s invasion of Ukraine. The Biden administration could also act alone. High energy prices threaten to stall global growth, a risk that is sending tremors across markets.
Grains, metals and natural gas have also surged on concerns of chaos in raw-material flows due to the invasion and sanctions on Russia that are turning the resources powerhouse into a global pariah. Commodity-linked currencies like the Australian dollar strengthened.
The euro sank — at one point dropping below parity against the Swiss franc — on concerns about the economic outlook for Europe, which relies on Russian energy. Treasuries and the dollar advanced, with the U.S. 10-year Treasury yield falling to about 1.70%. Gold momentarily touched $2,000 an ounce.
The global economy was already struggling with high inflation due to pandemic-era effects. The Federal Reserve and other key central banks now face the tricky task of tightening monetary policy to contain the cost of living without upending economic expansion or roiling risky assets.
“For the U.S. economy, we now see stagflation, with persistently higher inflation and less economic growth than expected before the war,” Ed Yardeni, president of Yardeni Research, wrote in a note. “For stock investors, we think 2022 will continue to be one of this bull market’s toughest years.”
The worries about the war overshadowed China’s signal that more stimulus is on the cards after it set an economic…