US futures drop, treasuries rise on Ukraine risk: markets wrap

Gold was at $1 874.61 an ounce, up 0.3%.
Image: Soichiro Koriyama/Bloomberg

US equity futures fell Thursday, Treasuries jumped and the dollar rallied in another bout of risk aversion sparked by the Ukraine standoff. Crude oil pared losses.

S&P 500, Nasdaq 100 and European contracts slid as traders evaluated a flurry of speculation about the situation in eastern Europe. Asian shares were mixed. Havens such as the yen and gold pushed higher. The US 10-year Treasury yield retreated to about 2%.

Russian-backed separatists claimed Ukrainian forces violated cease-fire rules overnight, according to a report from RIA Novosti, a Russian state news agency. The Luhansk separatist claim doesn’t mention any casualties. Allegations of cease-fire violations from both sides are frequent.

Earlier, the US rejected Russia’s claims of a troop pullback from Ukraine’s border. The Kremlin has repeatedly denied any plans to invade its neighbour.

Oil, at one point down more than 3%, trimmed the retreat to some 1%. Crude had been hurt by the prospect of a resumption in official Iranian exports if diplomatic talks lead to a nuclear accord. But it has also been whipsawed by supply worries stemming from the Russian troop buildup.

The latest gyrations show that “equities markets are still vulnerable to Ukraine-Russia related geopolitical risks,” said Lee Jaesun, an analyst at Hana Financial Investment Co.

Those concerns over Ukraine overshadowed the latest Fed minutes, in which officials concluded they would start raising rates soon and were on alert for persistent inflation that would justify faster tightening. There were few new details on balance-sheet runoff plans.

Investors expect at least 150 basis points of Fed tightening in 2022 — up from 75 basis points just a few weeks ago — to fight price pressures. The worry is whether the pivot away from pandemic-era stimulus will squeeze economic growth and inject more turbulence across assets.

“The market will continue to be quite volatile until certain questions are clarified — for example, how these rate hikes are going to be laid out going forward,” Marcella Chow, JPMorgan Asset Management global market strategist, said on Bloomberg Television.

Chow said another issue was whether a more detailed roadmap for quantitative tightening would be laid out in the March Fed policy meeting.

Here are some key events this week:

  • G-20 finance ministers, central bank governors meet, Thursday through Feb. 18
  • Cleveland Fed President Loretta Mester, St. Louis Fed President James Bullard speak, Thursday
  • US Monetary Policy Forum: speakers including Fed officials Charles Evans, Christopher Waller and Lael Brainard, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures fell 0.5% as of 6:45 a.m. in London. The S&P 500 rose 0.1%
  • Nasdaq 100 futures fell 0.7%. The Nasdaq 100 fell 0.1%
  • Japan’s Topix index fell 0.8%
  • Australia’s S&P/ASX 200 Index rose 0.2%
  • South Korea’s Kospi index rose 0.5%
  • Hong Kong’s Hang Seng Index fell 0.3%
  • China’s Shanghai Composite Index was flat
  • Euro Stoxx 50 futures slid 0.7%

Currencies

  • The Japanese yen was at 115.32 per dollar, up 0.2%
  • The offshore yuan was at 6.3320 per dollar
  • The Bloomberg Dollar Spot Index rose 0.1%
  • The euro was at $1.1355, down 0.2%

Bonds

  • The yield on 10-year Treasuries was at 2.01%, down three basis points
  • Australia’s 10-year yield was at 2.21%, down three basis points

Commodities

  • West Texas Intermediate crude declined 1.5% to $92.26 a barrel
  • Gold was at $1 874.61 an ounce, up 0.3%
© 2022 Bloomberg

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