Trading Day: Bracing for global rate hikes

ORLANDO, Florida, March 19 (Reuters) - Wall Street fell on Thursday in highly volatile trading that saw huge swings in world stocks, bonds and oil prices, as traders began to price in global interest rate hikes to counter the inflationary pressures of the Middle East energy crisis.

In my column today I look at the increasing likelihood that incoming Fed Chair Kevin Warsh's first interest rate move will be a hike, not the cut his boss is craving.

If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.

1. Trump tells Israel not to repeat strikes on Iranianenergy as crisis deepens 2. Iran attacks wipe?out 17% of Qatar's LNG capacity for upto five years, QatarEnergy CEO says 3. Iran war leaves deep, costly scar on Mideast energy:Bousso 4. Central banks stand ready to tackle war-led inflation 5. Iran war escalation wakes markets up to risks of deepereconomic pain

Today's Key Market Moves

* STOCKS: A sea of red in Asia and Europe. Japan, India,South Korea down 3% or more; Britain, Germany, pan-Europeanbenchmarks down 2% or more. Wall Street's big three indices parelosses but end down 0.3-0.4%. * SECTORS/SHARES: Eight sectors on the S&P 500 fall,materials -1.6%, consumer staples and discretionaries -0.8%.Energy +1.5%. Baker Hughes +5.6%, Chevron +1.4%; Newmont -7%,Micron Technology -4%. * FX: Dollar slides 1%, biggest fall since April lastyear, as non-Fed cenbanks turn hawkish. Euro, yen, sterling biggainers after respective policy meetings. * BONDS: U.S. yields rise as much as 12 bps, 2s/10s curveflattens to 40 bps, flattest since August. 2y gilt yield soars30 bps * COMMODITIES/METALS: Oil settles +1% but well off earlierhighs - Brent had nudged $120/bbl. Gold -4%.

Today's Talking Points

* The fog of war

The longer the war in the Middle East goes on, the more questions it raises. Has the Trump administration met its goals or not? Does it need help from its allies or not? Will the Strait of Hormuz re-open soon or not? Are Israel and the U.S. communicating closely or not?

In a sign that $100 oil and financial market pressures are bearing down on Washington, U.S. Treasury Secretary Scott Bessent on Thursday said sanctions on Iranian oil may be removed. This follows a similar easing of curbs on Russian oil last week.

* Short-term price pain, long-term macro pain

Pressure on the Fed and other central banks to raise rates to counter energy-driven inflation is mounting rapidly. But the long-term economic damage - consumer spending, wealth effects, and energy supply disruptions or even shortages - could be substantial.

These opposing forces are being highlighted in the dramatic flattening of yield curves. The two-year U.S. yield is shooting up to 3.90%, the highest since August, shrinking the gap between the 10-year yield to just 40 bps. A policymaker's nightmare.

* Gold melts

This should be gold's moment - war, geopolitical crisis, a global energy shock, $100-a-barrel oil, and inflation pressures soaring - yet it is crumbling. It's down 8% this week, on track for its worst week since March 2020. It's down 13% this month, which would be its worst month since 2008 and second-worst in more than 40 years.

What's going on? It's worth recalling the rally that culminated in gold topping $5,500/oz in January, much of which was speculative. Now that investors - retail, institutional, official - are scrambling for cash and liquidity, assets that went up most are vulnerable. None more so than gold.

What could move markets tomorrow?

* Developments in the Middle East * Energy market moves * New Zealand trade (February) * Taiwan exports (February) * China interest rate decision * UK public finances (February) * Germany producer price inflation (February) * Euro zone trade, current account (January) * Canada producer price inflation (February) * Canada retail sales (February)

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

(Reporting by Jamie McGeever; Editing by Nia Williams)