U.S. Equity Futures Slip as Crude Oil Extends Jump: Markets Wrap
- Traders mull Russia-Ukraine talks; China loan prime rates held
- Dollar gauge edges up; Fed’s Powell to speak later Monday
U.S. equity futures and stocks slipped Monday as crude oil jumped and investors monitored diplomatic efforts to bring an end to Russia’s almost month-old war in Ukraine.
Shares dropped in China, Hong Kong and South Korea, where data signaled a rising energy-import bill and easing export growth. S&P 500, Nasdaq 100 and European contracts retreated. Overall, the moves pointed to a pause in global equities after their best weekly performance since 2020.
West Texas Intermediate oil rose past $108 a barrel as investors assessed the war as well as Middle East tension. Australia’s ban on exports of alumina to Russia sparked an advance in aluminum. A gauge of the dollar climbed.
Russia is pressing on with its invasion of Ukraine, which has stoked inflation by pushing up the price of key commodities such as oil and wheat. Turkey said Moscow and Kyiv are moving closer in talks toward a cease-fire.
The bond market continues to flash caution about risks from the war and rising U.S. interest rates. The Treasury yield curve is flattening, and portions are inverted, which for some is an indicator of a looming economic slowdown. Treasury futures fell. There’s no cash trading in Asia due to a Japan holiday.
A key question is whether last week’s stock rebound and moderation in volatility are durable. China’s vow to support its markets and economy is helping, though the wait for more easing continues after Chinese banks left borrowing costs unchanged.
While markets are deriving hope from the peace talks, “the truth is a bit more complex because, unfortunately, we have major devastation going on,” Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore, said on Bloomberg Television. “Uncertainty remains elevated,” he added.
Investors are awaiting a speech later Monday by Federal Reserve Chair Jerome Powell, less than a week after he and his colleagues kicked off a campaign of interest-rate hikes to fight the highest inflation in a generation. Markets expect the Fed to lift its target rate to around 2% by the end of this year.
“Our concern is that the Fed is tightening into an economic slowdown as it prioritizes high inflation,” Sue Trinh, head of Asia macro strategy at Manulife Investment Management, said on Bloomberg Television. “It will balance that trade-off of slower growth, higher inflation by lagging the market pricing in terms of the pace, the magnitude and the duration of this tightening cycle.”
In China, embattled real-estate developer China Evergrande Group suspended trading in Hong Kong. Meanwhile, reopening stocks in the city climbed as Hong Kong moved to ease Covid-related restrictions.