From Wayne Cole
SYDNEY (Reuters) – Asian stock markets began the week in a sober mood on Monday as fighting in Ukraine continued with no sign of stopping, leaving investors hoping for a possible peace deal.
The Turkish Foreign Minister said on Sunday that Russia and Ukraine were in agreement on “critical” issues and that he hoped for a ceasefire.
Investors were also anxiously waiting to see if Russia would make more interest payments this week. It has to pay $ 615 million in coupons this month, while on April 4 comes a $ 2 billion bond.
Most stock markets called last week in anticipation of a possible peace deal with Ukraine, but it could actually make progress to justify further gains.
President Joe Biden will travel to Europe on Thursday to meet with NATO allies and will visit Poland on Friday.
BofA’s global fund manager survey had a bearish ting with cash levels the highest since April 2020 and global growth expectations the lowest since the 2008 financial crisis.
Long oil and commodities were the most popular trades, and vulnerable to a retreat.
Trade was weak with Japan on holiday, so S&P 500 stocks fell 0.3% and Nasdaq futures 0.4%. EUROSTOXX 50 futures were down 0.1% and FTSE futures were up 0.1%.
MSCI’s broadest index of Asia-Pacific stocks outside Japan was flat. The Japanese Nikkei was closed, but futures traded about 200 points above the cash close.
Chinese Blue Chips rose 0.1%, with investors waiting for further details of possible stimulus from Beijing.
Bond markets were slated for more hawkish language by the Federal Reserve with President Jerome Powell on Monday, and at least half a dozen other members through the week.
Politicians have marked a string of hikes ahead to take the fund rate anywhere from 1.75% to 3.0% by the end of the year. The market implies a 50-50 chance of a half-point hike in May and an even greater chance by June.
“In balancing the short-term upside risks to inflation with the downside risks to growth, central banks are sending a clear and strong signal that policy is on track to normalize,” said JPMorgan chief economist Bruce Kasman.
“However, a sustainable cut in Russia’s energy supply would push inflation significantly higher, increase an already severe squeeze on US consumer purchasing power,” he warned, adding that it could potentially push the eurozone into recession. throw.
“Under this scenario, policy normalization around the world would stop.”
CURVE FLAT
The market seems to be aware of the risks to growth following the marked slowdown in the Treasury yield curve in recent weeks. The spread between two- and 10-year payouts has shrunk to just 21 basis points, the smallest since the start of the pandemic in early 2020.
Higher Treasury yields have helped lift the US dollar to the yen, where the Bank of Japan remains committed to keeping payouts close to zero. The dollar rose near its highest since early 2016 to 119.18 yen, up 1.6% last week.
The dollar was less fortunate elsewhere, in part because history has shown that the currency tends to decline when the Fed launches a tense campaign.
The euro was trading at $ 1.1045 on Monday, after jumping 1.3% last week. The dollar index stood at 98,270, from its recent high of 99,415.
Joseph Capurso, head of international economics at CBA, notes Flash manufacturing (PMI) surveys from Europe would be a hurdle for the euro this week.
“Europe is most exposed to less supply of, and higher prices for, gas and agricultural imports from Russia and Ukraine,” he said. “A fall in the Eurozone PMI in contractionary territory could push EUR / USD back closer to its war low of $ 1.0806.”
In commodity markets, gold failed to gain much from a lift of safe-haven flows or inflation conditions, losing more than 3% last week. It was last up 0.3% at $ 1,927 an ounce. [GOL/]
Oil prices also lost ground last week, but pushed higher on Monday as there was no easy replacement for Russian barrels in a tight market. [O/R]
Brent was quoted $ 2.85 higher at $ 110.78, while U.S. cream rose $ 2.90 to $ 107.60 a barrel.
(Report by Wayne Cole; Edited by Sam Holmes)
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