U.S. stocks on Friday, fell , Dow Jones Index fell 2.11%, Nasdaq Index fell 3.8%, S&P 500 Index fell 2.8%. At the same time, international crude oil prices soared, WTI crude oil futures contracts soared 5.19% in a single day, to $93.04 per barrel, up 17.02% throughout the week. Why did the US stocks suddenly fall sharply, and why did crude oil rise sharply? The power of the game behind it is not simple.
US stocks rose sharply in the first two trading days of this week. The Dow Jones Index rose by more than 5% in two days, but after the big drop on Friday, US stocks have reaped their previous rises and returned to the low point. US stocks rose at the beginning of the week due to changes in market expectations for Fed rate hikes . In the previous period, the Federal Reserve hikes Fed hikes have been hikes , causing a sharp decline in US stocks. Investors believe that the Federal Reserve's rate hikes may come to an end, triggering a short-term rebound. But after just two days of rising, new changes have occurred in market expectations.
Crude oil futures fell to $76.31 per barrel and began to strengthen after falling to $76.31 per barrel. The rise and fall of oil prices have a great impact on the core inflation data of the United States. Previously, crude oil fell from a high of $133.46 to $76.31, which eased the inflation pressure of the United States. The market believes that the Federal Reserve does not need to raise interest rates sharply. Now oil prices have risen again, standing up to $90 again, which means that the US inflation data will be pushed up again. In order to curb inflation, the Federal Reserve has to raise interest rates again, which constitutes a negative for the stock market.
Why is crude oil rising again? This has to be said of the latest move of "OPEC+". The ministerial meeting of " OPEC " announced the largest production cut since the epidemic on October 5. OPEC+ announced a 2 million barrels per day production cut, which made the United States unexpected. Previously, the United States had asked OPEC+ not to reduce production, but OPEC+ did not surpass the United States at all. Not only did it reduce production, but it also cut production on the largest scale. As soon as the news came out, international oil prices rose sharply.
This aroused strong opposition from the White House of the United States. Washington accused it of "standing with Russia", but OPEC did not buy it. Faced with the provocative question of the American reporter "Are you using energy as a weapon?", OPEC Secretary-General Haysham Gaes said: "We do not endanger the energy market, we are providing security and stability for the energy market", and responded to the US media.
Why is OPEC+ not listening to the United States and stabbing the knife in the back when the United States is worried about inflation? After all, it is still interests. OPEC+ is an alliance of oil-producing countries composed of OPEC and allies including Russia. Of course, they have to make money. If oil prices plummet, they will naturally make less money. Oil-producing countries do not care how high US inflation is. Moreover, this organization itself includes Russia. The United States wants to limit oil prices on Russia to reduce Russia's energy income. As an alliance, OPEC+ is on Russia's side this time.
At the same time, this is to compete for the pricing power of energy. Before the epidemic, the United States had been asking OPEC to reduce production, while the production of shale oil has been increasing. The United States not only made more money, but also increased its dominance in the crude oil market. Crude oil is priced in US dollars. Now the United States has lowered crude oil by raising interest rates, which naturally makes OPEC unhappy. Therefore, OPEC ignores the demands of the United States and insists on reducing production, which is also competing with the Federal Reserve for the pricing power of energy. If the United States continues to raise interest rates sharply and inflation has not yet fallen, then tightening policies will affect economic expansion, and there is a high probability that will stagflation and even a recession will occur.
