U.S. equities declined on Tuesday as traders assess the impact of aggressive rates hike and the effect of additional Russian sanctions on the stock market. And the moves could boost coal stocks.
The European Union on Tuesday announced it was considering banning coal imports from Russia after numerous reports painted a gory picture of acts committed against civilians in Ukraine.
“These atrocities cannot and will not be left unanswered,” said Ursula von der Leyen, the president of the European Commission.
Von der Leyen, who spoke in the early hours Tuesday, estimated that the sanction would amount to $4.4 billion worth of coal a year. However, the commission plans to allow for a three-month wind-down period before restricting new contracts.
As if that wasn’t enough, Lael Brainard, Federal Reserve governor, during her speech at a Minneapolis Fed discussion said the inflation rate is presently too high and that policy tightening will include a speedy balance sheet reduction and consistent interest rate increases — suggesting the Fed could raise rates more than the 25 basis points at a time expected by the markets.
“Inflation is much too high and is subject to upside risks,” she said in prepared remarks. “The Committee is prepared to take stronger action if indicators of inflation and inflation expectations indicate that such action is warranted.”
Her speech coupled with the Russia-Ukraine uncertainty sent Dow Jones, Nasdaq and S&P 500 down by -0.11%, -1.46% and -0.48%, respectively. According to a Bloomberg report, futures contracts for coal to be delivered to northwest Europe rose by 11% to $211 per ton.
If the European Union goes ahead with the sanctions, the resultant scarcity would boost coal stocks, as seen when the news first broke out earlier today. For instance, Pearbody Energy Corporation (NYSE:BTU), the largest private-sector coal mining company, has gained around 2% so far today.
Similarly, Arch Resources (NYSE:ARCH) rose by close to 1% and Ramaco Resources (NASDAQ:METC) appreciated by over 3%. Therefore, to take advantage of the situation it would be wise to hold a position in coal companies exposed to Europe market.
On the date of publication, Samed Olukoya did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
