U.S. Futures Climb on Ukraine Talks, China Pledge: Markets Wrap

U.S. Futures Climb on Ukraine Talks, China Pledge: Markets Wrap
  • China vows to support markets; Kremlin hints at talks progress
  • Europe stocks surge; Treasuries dip before Fed rates decision

U.S. futures and European stocks surged on Wednesday after the Kremlin hinted at progress in peace talks with Ukraine, adding to positive sentiment stoked by China’s vow to stabilize its markets. Treasuries and the dollar slipped ahead of the Federal Reserve rates decision.

A Ukrainian proposal to become a neutral country but retain its own armed forces “could be viewed as a certain kind of compromise,” Kremlin spokesman Dmitry Peskov said Wednesday, fueling optimism a negotiated solution may be possible. Earlier, China vowed policies to spur economic growth and boost its battered financial markets.

Contracts on the tech-heavy Nasdaq 100 jumped more than 2% while those on the S&P 500 crested 1%. U.S.-listed Chinese stocks soared, with Alibaba Group Holding Ltd. and Baidu Inc. both up as much as 20% in premarket trading, while Didi Global Inc. jumped more than 40%. The Stoxx Europe 600 index jumped as much as 2.9%, with technology shares leading the advance as Prosus NV rebounded 21% from a record low.

An Asia-Pacific share gauge advanced the most since 2020, a measure tracking mainland companies listed in Hong Kong posted the biggest gain since the global financial crisis and a Chinese tech index added a record 20%.

Hong Kong's China stock gauge jumps most since 2008

“The market was indeed oversold, irrational, in the dramatic rout, so real money is back doing bottom fishing,” said Castor Pang, head of research at Core Pacific Yamaichi.

 

West Texas Intermediate crude oil rose, but staye dbelow $100 a barrel. The International Energy Agency said Wednesday that Russia’s oil output may drop by about a quarter next month. Treasuries edged lower, pushing 10-year and 30-year yields to the highest since 2019.

A quarter-point Fed rate increase, the first since 2018, to fight high inflation is widely anticipated but there’s less certainty beyond that. While markets expect a total of seven such moves this year, policy makers also have to factor in growth risks emanating from Russia’s invasion of Ukraine. Data Wednesday showed U.S. retail sales slowed in February, suggesting that consumers are pulling back spending as inflation limits purchasing power.

“We will be closely watching the Fed’s dot plot, which we expect to signal five or six interest-rate hikes this year, more than December’s projections but in line with market expectations,” wrote Lauren Goodwin, portfolio strategist at New York Life Investments. “A dot plot projecting more hiking would likely be a hawkish signal and could result in an earlier yield curve inversion.”

Russia has begun the process of paying $117 million in interest due Wednesday on dollar bonds. The country would be in default if it doesn’t pay the coupons in U.S. currency within a 30-day grace period, according to credit assessor Fitch Ratings. The ruble strengthened in Moscow trading.

Meanwhile, yields on German bunds rose after the cabinet approved additional borrowing of at least 200 billion euros ($220 billion) this year to finance a fund to modernize the military alongside already-planned debt for climate protection and other initiatives.

Elsewhere, the London Metal Exchange froze electronic trading in nickel immediately after it restarted from a week-long suspension, after a systems glitch allowed prices to plunge past a new daily limit that was supposed to help restore order following last week’s historic short squeeze.

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Here are some key events to watch this week:

  • FOMC rate decision and Fed Chair Jerome Powell news conference, Wednesday
  • Bank of England rate decision, Thursday
  • ECB President Christine Lagarde, Executive Board member Isabel Schnabel, Governing Council member Ignazio Visco and Chief Economist Philip Lane speak at a conference, Thursday
  • Bank of Japan rate decision, Friday

Some of the main moves in markets:

Stocks

  • Futures on the S&P 500 rose 1.2% as of 8:35 a.m. New York time
  • Futures on the Nasdaq 100 rose 1.7%
  • Futures on the Dow Jones Industrial Average rose 1.1%
  • The Stoxx Europe 600 rose 2.7%
  • The MSCI World index rose 1.1%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.4%
  • The euro rose 0.4% to $1.1004
  • The British pound rose 0.4% to $1.3094
  • The Japanese yen was little changed at 118.29 per dollar

Bonds

  • The yield on 10-year Treasuries advanced three basis points to 2.17%
  • Germany’s 10-year yield advanced six basis points to 0.39%
  • Britain’s 10-year yield advanced four basis points to 1.62%

Commodities

  • West Texas Intermediate crude rose 0.8% to $97.19 a barrel
  • Gold futures fell 0.6% to $1,918.30 an ounce

— With assistance by Emily Barrett, and Sunil Jagtiani

 

https://www.bloomberg.com/news/articles/2022-03-15/asia-to-get-boost-from-easing-china-rout-oil-drop-markets-wrap?srnd=markets-vp