Stocks and crude oil made steady gains Tuesday amid a lull in the intense market volatility sparked by the war in Ukraine and the ensuing sanctions on Russia for invading its neighbor.
Shares advanced in Japan and China, where data showed better manufacturing activity. The nation set a weaker-than-expected reference rate for the yuan. Hong Kong equities lagged amid reports that the city is planning a lockdown for Covid-19 testing. U.S. futures fluctuated after the S&P 500 dipped Monday.
Treasuries gave back some of their surge from the Wall Street session, which was driven by risk aversion and month-end rebalancing. The dollar was little changed. Oil edged higher, with traders focused on the possible release of emergency stockpiles to counter fears of disruption to Russian exports.
Russia’s markets remain under pressure after the U.S. and its allies moved to block the Bank of Russia’s access to foreign reserves and cut some lenders off from the SWIFT messaging system for global banking.
President Vladimir Putin announced countersanctions, while officials also introduced some capital controls to try and stem a ruble plunge. There’s a growing risk that Russia’s stocks and bonds could be kicked out of major investment benchmarks as they become increasingly hard to trade.
Markets have been whipsawed by the conflict and steps to isolate commodity-rich Russia. Disruptions to supplies of raw materials such as grain and energy threaten to stoke already-high inflation and hamper growth, just as the Federal Reserve prepares to raise interest rates. Lenders worldwide are already making it harder to finance transactions involving Russian resources.
“We could see a longer off-ramp for inflation here” amid the added pressures to energy prices from the Russian invasion, Tracie McMillion, head of global asset allocation strategy at Wells Fargo Investment Institute, said on Bloomberg Television. She said a half-point Fed hike in March “is probably off the table” while adding she expects four quarter-point increases in 2022.
Atlanta Fed President Raphael Bostic, who does not vote on monetary policy this year, said he favors raising rates by 25 basis points in March and would consider a half-point move if inflation fails to decline.
“Over the next few weeks we’ll see a lot of gyrations and a potential for an even bigger dip,” Andy Kapyrin, co-chief investment officer at Regentatlantic Capital LLC, said on Bloomberg Television. “But that will be a dip worth buying because most geopolitical crisis are resolved relatively quickly.”
In cryptocurrencies, Bitcoin jumped past $43,000 on speculation that digital tokens could be increasingly used for payments in the wake of the sanctions against Russia.
Traders are awaiting the Reserve Bank of Australia monetary-policy decision, which is expected to leave interest rates at a record low.
