U.S. Futures Drop, Bonds Climb on Ukraine Risks: Markets Wrap

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(Bloomberg) — U.S. equity futures declined Monday and Asian stocks looked set to fall amid deepening geopolitical concerns and growing calls from Federal Reserve officials for higher interest rates to fight inflation.

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Nasdaq 100 contracts were down about 1%, while those for the S&P 500 were also in the red. Australian equities and futures for Japan and Hong Kong all slipped. U.S. markets are shut for a holiday Monday.

Havens including sovereign bonds and gold climbed on the threat of Russian military action against Ukraine. Australian and New Zealand bond yields fell, the dollar was mixed and the yen ticked up.

One key question is what might happen to supplies of energy, grain and some metals if the Ukraine situation deteriorates. Crude oil jumped as traders weighed those worries and the potential for a return of Iranian barrels.

The U.S. has told allies that a Russian invasion of Ukraine could target multiple cities beyond the capital, Kyiv. President Joe Biden said on Friday he’s convinced Russian counterpart Vladimir Putin has decided to move against Ukraine. Moscow continues to deny it plans to invade.

The standoff, along with the worry that tightening Fed monetary policy could choke growth in the world’s biggest economy, raise the likelihood of more swings in markets in an already volatile year.

Clients “are clearly concerned about tensions in Ukraine, which seem to be escalating, in addition to the concerns that we’ve been talking about for months like inflation and interest rates and slowing economic growth,” JoAnne Feeney, partner at Advisors Capital Management, said on Bloomberg Television.

Fed Outlook

Two top Federal Reserve officials at the end of last week backed raising rates in March to curb the hottest inflation in 40 years. They also supported starting balance-sheet reduction in coming months. JPMorgan Chase & Co. said the Fed is likely to raise rates by 25 basis points at nine consecutive meetings.

The Fed’s key inflation metric may have accelerated to a fresh four-decade high in January, data this week is expected to show.

In cryptocurrencies, Bitcoin pared some of a retreat from the weekend and was trading above $38,000.

China’s stocks will be closely watched amid fresh attempts by the government to crack down on the private sector and more default warnings from developers. A gauge of Chinese stocks traded in the U.S. tumbled Friday.

Bloomberg Economics expects China’s banks to keep loan prime rates steady after a cut in January.

Here are some events to watch this week:

  • Russia’s Foreign Minister Sergei Lavrov has agreed to meet U.S. Secretary of State Antony Blinken this week in Europe

  • Fed Governor Michelle Bowman speaks Monday

  • China property prices, loan prime rates Monday

  • New Zealand rate decision Wednesday

  • BOE Governor Andrew Bailey appears before the Treasury Committee Wednesday

  • Bank of Korea policy decision Thursday

  • EIA crude oil inventory report Thursday

  • Fed officials Loretta Mester and Raphael Bostic speak Thursday

  • U.S. new home sales, GDP, initial jobless claims Thursday

  • U.S. consumer income, U.S. durable goods, PCE deflator, University of Michigan consumer sentiment Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures fell 0.5% as of 8:26 a.m. in Tokyo. The S&P 500 fell 0.7% Friday

  • Nasdaq 100 futures lost 1%. The Nasdaq 100 fell 1.1% Friday

  • Nikkei 225 futures fell 0.9% earlier

  • Australia’s S&P/ASX 200 Index fell 0.6%

  • Hang Seng Index futures lost 0.8% earlier

Currencies

  • The Japanese yen was at 114.89 per dollar, up 0.1%

  • The offshore yuan traded at 6.3259 per dollar

  • The Bloomberg Dollar Spot Index rose 0.2% Friday

  • The euro was at $1.1319

Bonds

Commodities

  • West Texas Intermediate crude rose 1.8% to $92.71 a barrel

  • Gold was at $1,903.90 an ounce, up 0.3%

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