(Bloomberg) – Treasuries, gold and the dollar drove gains in safe-haven assets after Russian President Vladimir Putin escalated his war on Ukraine, shaking markets that were already bracing for a rally higher. Federal Reserve rate.
The euro fell and oil surged as investors reacted to Putin’s vow to use any means necessary to defend “Russia’s territorial integrity”. European and US equity futures fell, after Asian stocks which were well into the red on the open.
Ten-year Treasury yields fell four points to 3.52%. German debt of a similar date also fell.
A dollar gauge traded near an all-time high amid market jitters as bitcoin fell below $19,000. The offshore yuan fell to its lowest against the greenback since mid-2020, even after the People’s Bank of China set the currency’s daily benchmark rate stronger than expected for a 20th day.
Fed officials are on the verge of quantifying the “pain” they warned of when the central bank released new economic projections on Wednesday. They are expected to rise another 75 basis points, according to the vast majority of analysts polled by Bloomberg. Only two are planning a 100 basis point move.
“Volumes remain light and the mood cautious, few looking to take big positions until they hear what the Fed is saying and where policymakers see rates moving at the end of the hike cycle,” said Fiona Cincotta. , senior financial market analyst at City Index. . “That’s what’s going to drive the markets, not the rate hike tomorrow, but what the Fed plans to do next.”
Nouriel Roubini, who correctly predicted the 2008 financial crisis, sees a “long and ugly” recession occurring in late 2022 that could last all of 2023 and a sharp correction in the S&P 500. “Even in an ordinary recession, the S&P 500 can drop 30%,” the chairman of Roubini Macro Associates said. In “a real hard landing,” which he expects, it could drop 40%.
Yet some professional speculators are refusing to surrender to a punishing, volatility-prone stock market, building bullish and bearish positions at the fastest pace in five years. As the S&P 500 plunged last week, hedge funds snapped up individual stocks while betting against the broader market with products like exchange-traded funds, according to data from the prime brokerage show. Goldman Sachs Group Inc.
Christopher Smart, chief global strategist at Barings LLC, said stock markets were further stressed by lower valuations, while some corners of credit markets remained attractive. “Quality investments and high returns are where my colleagues find many opportunities,” he said on Bloomberg Television. “The fundamentals of the US economy are very solid. They need to weaken a bit to calm some of those inflationary pressures, but you can find plenty of companies that have strong balance sheets.
Key events this week:
- Federal Reserve decision, followed by press conference with Chairman Jerome Powell, Wednesday
- Big bank CEOs testify before the US Congress in a pair of hearings on Wednesday and Thursday
- Existing home sales in the United States, Wednesday
- EIA Crude Oil Inventory Report, Wednesday
- Bank of Japan monetary policy decision, Thursday
- The Bank of England’s interest rate decision on Thursday
- US Conference Board leading index, initial jobless claims, Thursday
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Some of the major movements in the markets:
- S&P 500 futures fell 0.3% at 8:03 a.m. in London. The S&P 500 fell 1.1%
- Nasdaq 100 futures fell 0.3%. The Nasdaq 100 fell 0.9%
- Euro Stoxx 50 futures fell 0.9%
- Japan’s Topix fell 1.4%
- The Hang Seng index fell 1.6%
- The Bloomberg Dollar Spot Index rose 0.4%
- The euro fell 0.7% to $0.9897
- The Japanese yen was at 143.58 to the dollar
- The offshore yuan fell 0.4% to 7.0614 against the dollar
- The yield on 10-year Treasury bills slipped four basis points to 3.52%
- West Texas Intermediate crude rose 2% to $86.15 a barrel
- Gold climbed 0.5% to $1,672.29 an ounce
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