Stock gains with US futures as bond trajectory deepens: Markets wrap

(Bloomberg) – Stocks in Europe jumped along with US stock futures on Monday as negotiators from Russia and Ukraine prepare for a new round of talks. The global bond rout has deepened, with the five-year Treasury yield hitting 2% for the first time since 2019.

Most Read From Bloomberg

The Stoxx Europe 600 Index jumped more than 1%, with carmakers advancing after a “confident” outlook from Volkswagen AG. Core resource and energy stocks fell as crude oil declined along with natural gas. Tech investor Prosus NV plunged more than 10% after continuing to sell Chinese tech shares amid regulatory headwinds and concerns over Beijing’s relationship with Russia. Contracts in the S&P 500 and Nasdaq 100 rose, suggesting that some calm may return to US markets after choppy trading last week.

The 10-year Treasury yield rose to its highest level since July 2019 and the yield in the Eurozone also jumped. On Wednesday, the Federal Reserve is expected to begin a cycle of interest rate increases to rein in inflation, starting with a 25 basis point move. Price pressures were already high before the conflict and the isolation of resource-rich Russia led to volatile commodity flows.

Investors are analyzing diplomatic efforts as Russia continues its war in Ukraine, as well as comments from a US official that Moscow has requested military assistance from China. A flat US Treasury yield curve, and a 12% drop in global stocks this year, are signaling fears that easing stimulus and rising energy, grain and metal costs could stifle the global economic recovery.

See also  Bed Bath & Beyond turns off air conditioners in stores to save money: Report

“We are seeing extraordinary volatility in global equities exacerbated by volatility in market sentiment, and the risk of a recession growing as commodity prices rise,” Louise Dudley, global equity portfolio manager at Federated Hermes, wrote in a note. “We expect continued volatility in the short term as geopolitical uncertainty continues over Russian crude oil.”

The 9% decline in a gauge of Chinese tech companies echoed across the region, leaving the Asia-Pacific stock index in the red for a second session. The Covid lockdown in Shenzhen, the tech hub, has added to the geopolitical and regulatory risks facing the sector.

Crude Oil declined while remaining above $105 a barrel. The dollar fell and gold fell. The ruble was flat against the dollar in Moscow’s trading, with the Russian stock market still closed. Investors are waiting to see if Russia is defaulting on its international debt after losing access to nearly half of its foreign exchange reserves.

Federal Reserve ‘stuck’

The Federal Reserve is the debit card among eight members of the Group of Twenty whose monetary officials are due to assess the economic outlook this week.

The Fed is “really stuck between the real economy and the financial economy,” Karen Harris, global head of global macro research at Bain & Co., told Bloomberg Television. “You have the mainstream struggling with inflation – which is why we are prepared to see these spikes coming in March. On the flip side, we try not to cheat the financial economy. Both paths are deflation, or recession.”

See also  Tesla was unable to resume production in Shanghai on Monday

While the US and some other countries are tightening monetary settings, speculation is growing that China will provide more easing to ease the slowdown. The yuan and the 10-year Chinese government bond yield fell.

Meanwhile, top US and Chinese officials are scheduled to meet on Monday to discuss Ukraine. Russian missiles have struck a military training facility in western Ukraine near Poland, raising new concerns about the conflict potentially extending across Ukraine’s borders.

Here are some of the main events to watch this week:

  • China’s one-year medium-term lending facility rate, economic activity data, Tuesday

  • Crude oil inventory report from the Energy Information Administration, Wednesday

  • The Federal Open Market Committee’s (FOMC) rate decision and Federal Reserve Chair Jerome Powell’s press conference, Wednesday

  • Bank of England interest rate decision, Thursday

  • European Central Bank President Christine Lagarde, Executive Board Member Isabelle Schnabel, Board Member Ignazio Visco and Chief Economist Philip Lane speak at a conference on Thursday.

  • Bank of Japan rate decision, Friday

For more market news, follow our Markets Live blog.

Some of the main movements in the markets:

Stores

  • The Stoxx Europe 600 is up 1.2% as of 9:37 am London time

  • S&P 500 futures rose 0.6%

  • Nasdaq 100 futures rose 0.3%.

  • Futures on the Dow Jones Industrial Average rose 0.8%

  • MSCI Asia Pacific Index is down 1.4%

  • The MSCI Emerging Markets Index is down 2.2%.

Currencies

  • The Bloomberg Spot Dollar Index is unchanged

  • The euro rose 0.4 percent to $1.0960

  • The Japanese yen fell 0.5% to 117.84 per dollar

  • The external yuan fell 0.3 percent to 6.3758 per dollar

  • The British pound rose 0.1 percent to $1.3051

See also  Live news: Eurozone unemployment rate hits record low

bonds

  • The 10-year Treasury yield advanced nine basis points to 2.08%.

  • Germany’s 10-year yield advances nine basis points to 0.33%.

  • UK 10-year bond yield advances nine basis points to 1.58%

goods

  • Brent crude fell 3.2% to $ 109.12 a barrel

  • And spot gold fell 1.3 percent to 1962.76 dollars an ounce

Most Read Bloomberg Businessweek

© Bloomberg LP 2022

Leave a Reply

Your email address will not be published.