A man wearing a protective mask, amid the outbreak of the coronavirus disease (COVID-19), walks through an electronic board displaying the Shanghai Composite Index, the Nikkei Index and the Dow Jones Industrial Average outside a brokerage in Tokyo, Japan, March 7, 2022. REUTERS/Kim Kyung-Hoon
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- > Asian Stock Markets:
- S&P 500 futures 0.5%, Chinese stocks fall
- Yields rise ahead of expected rate increases from the Fed and Bank of England
- The dollar rose to a 5-year high against the yen as the Bank of Japan slows down
- US crude oil fell more than $2 a barrel
SYDNEY (Reuters) – Stock markets were mostly flat and oil fell on Monday on hopes of progress in peace talks between Russia and Ukraine even as fighting continued to rage, while bond markets braced for an interest rate hike in the United States and the United Kingdom this week.
And while Russian missiles struck a large Ukrainian base near the border with Poland on Sunday, both sides gave their most optimistic assessments yet about the prospects for talks. Read more
Only Peace Opportunity saw S&P 500 stock futures increase 0.5%, while Nasdaq futures rose 0.4%. EUROSTOXX 50 futures are up 0.5%, FTSE futures are up 0.2%.
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Nikkei in Tokyo (.N225) It rose 0.9%, but the broadest MSCI Asia-Pacific stock index outside Japan (.MIAPJ0000PUS.) It fell 1.6% due to losses in China.
Chinese blue chips (.CSI300) A decline of 1.7% after a jump in coronavirus cases shut down the southern city of Shenzhen and fueled speculation about more policy easing. Read more
Bonds elsewhere remained under pressure after being battered last week as higher commodity prices appeared to boost inflation further, with 10-year Treasury yields rising four basis points to 2.04%.
Notably, a key gauge of US inflation expectations has risen to 3% and is close to record levels.
This only reinforced expectations that the Fed will raise interest rates by 25 basis points at its policy meeting this week and point to more by members’ “pop-up” expectations.
“Points are likely to essentially aggregate around four or five highs in 2022, up from three previous highs, given the strongest pace of inflation since the January FOMC meeting,” said Kevin Cummins, chief US economist at NatWest Markets.
“We think we can also get an appendix on how the Fed plans to trim the balance sheet as early as this week.”
The Bank of England is expected to raise interest rates to 0.75% on Thursday, the third straight hike, and the sign further with the market pricing in 2% by the end of the year. Read more
Fed Fund futures are pointing to at least six or seven hikes this year to around 1.75%, putting the US dollar supported near the highest level since May 2020.
The euro was stuck at $1.0905, not far from a 22-month low of $1.0804, while the dollar hit a five-year high against the yen at 117.87.
The Bank of Japan is seen lagging far behind other major central banks in tightening policy.
“The yen has not been able to show typical safe-haven traits, due in part to the surge in US yields and the BOJ yield curve control policy preventing JGBs after a rally in core global yields,” said Rodrigo Cattrell, a senior official. Forex Strategist at NAB.
“Japan is also a large energy importer which raises concerns about the terms of trade shock from higher energy prices.”
Gold lost some of its charm as a safe haven on Monday, down 0.5% to $1,975 an ounce and off last week’s peak of $2,069.
Likewise, the chance of progress in Ukraine has made oil prices slightly give up their recent gains, even as talks with the Iranian producer have stalled. Read more
Brent was last quoted a decrease of $2.13 to $110.54, while US crude fell $2.46 to $106.84.
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Reporting from Wayne Cole. Editing by Sam Holmes and Shri Navaratnam
Our criteria: Thomson Reuters Trust Principles.
