Asian stocks and U.S. equity futures were steady Tuesday as traders parsed geopolitical risks, worries about Federal Reserve policy tightening and steps by China’s central bank to support growth.
Shares fluctuated in China, where the monetary authority injected a net 100 billion yuan ($15.7 billion) into the banking system with its medium-term lending facility. Equities wavered in Hong Kong and retreated in Japan.
The S&P 500 notched a third straight drop Monday after a few rebound attempts, while the technology-heavy Nasdaq 100 closed with a small gain.
Treasury yields edged down amid a flatter curve signaling concerns that looming Fed interest-rate hikes could choke economic growth. The ebb and flow of haven demand due to the Ukraine standoff has also whipsawed bonds of late. The dollar dipped. Gold held on its recent gains.
The Russia-Ukraine tensions are still keeping oil markets on edge. West Texas Intermediate inched lower but remained around $95 a barrel after earlier scaling that mark for the first time since 2014.
Diplomatic efforts are continuing to defuse the Ukraine situation. While U.S. officials have warned a Russian invasion of Ukraine may be imminent, Moscow has repeatedly denied that one is planned. Before the crisis flared, markets were already nervous over high inflation and the withdrawal of Fed stimulus.
“What we are seeing is a Fed that is reacting to inflationary prints even though many of the pressures on inflation are factors that the Fed really can’t solve,” Kristina Hooper, chief global market strategist at Invesco, said on Bloomberg Television. “So that certainly increases the risks and reduces the clarity.”
Gyrations over Ukraine took a twist Monday, when its President Volodymyr Zelenskiy wobbled markets with what his office later said was a sarcastic comment about the rest of the world predicting a Russian attack on Wednesday.
Sarcasm in Ukraine Spooks Markets Swinging Between War and Peace
Meanwhile, Fed officials came out with another round of views on the policy outlook. Fed Bank of St. Louis President James Bullard said the monetary authority needs to move forward its plans to raise rates to underline its inflation-fighting credibility.
Fed Bank of Kansas City President Esther George said the central bank should take a systematic approach to removing policy accommodation but be careful to not “oversteer.”
Here are some key events this week:
- U.S. PPI, Tuesday
- EIA crude oil inventory report, Wednesday
- FOMC minutes, Wednesday
- China CPI, PPI, Wednesday
- G-20 finance ministers, central bank governors meet, Thursday through Feb. 18
- Cleveland Fed President Loretta Mester, St. Louis Fed President James Bullard speak, Thursday
- U.S. Monetary Policy Forum: speakers including Fed officials Charles Evans, Christopher Waller and Lael Brainard, Friday
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.1% as of 10:51 a.m. in Tokyo. The S&P 500 fell 0.4%
- Nasdaq 100 futures rose 0.3%. The Nasdaq 100 rose 0.1%
- Japan’s Topix index fell 0.4%
- Australia’s S&P/ASX 200 Index fell 0.5%
- South Korea’s Kospi index was flat
- Hong Kong’s Hang Seng Index lost 0.1%
- China’s Shanghai Composite Index rose 0.1%
Currencies
- The Japanese yen was at 115.36 per dollar, up 0.2%
- The offshore yuan was at 6.3561 per dollar
- The Bloomberg Dollar Spot Index dipped 0.1%
- The euro was at $1.1311
Bonds
- The yield on 10-year Treasuries fell two basis points to 1.97%
- Australia’s 10-year bond yield rose five basis points to 2.19%
Commodities
- West Texas Intermediate crude fell 0.5% to $95 a barrel
- Gold was at $1,870.63 an ounce
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