Havens Advance, Euro Falls as Putin Advances War: Markets Wrap Up

Havens Advance, Euro Falls as Putin Advances War: Markets Wrap Up

(Bloomberg) — Treasuries, gold and the dollar were driven by gains in haven assets after Russian President Vladimir Putin escalated his war on Ukraine, rattling markets that were bracing for a rate hike too already large from the Federal Reserve.

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The euro fell and oil jumped as investors reacted to Putin’s pledge to use all means necessary to “protect Russia’s territorial integrity.” European and US stock futures fell, after Asian equities were well in the red from the open.

Ten-year Treasury yields fell four points to 3.52%. German debt also fell on a similar date.

The dollar gauge traded near an all-time high among market traders while bitcoin fell below $19,000. The offshore yuan fell to its lowest level against the greenback since mid-2020, even after the People’s Bank of China set the daily reference rate for the currency stronger than expected for a 20th day.

Fed officials are about to put numbers on the “pain” they’ve warned about when the central bank publishes new economic projections on Wednesday. They are expected to rise again by 75 basis points, according to the vast majority of analysts surveyed by Bloomberg. Only two projects move 100 basis points.

“Volume remains light and the mood cautious, with few looking to take large positions before they hear what the Fed has to say and when policymakers see rates coming to the end of the hiking cycle,” said Fiona Cincotta, senior financial markets analyst at City Index. . “This is what will drive the markets, not tomorrow’s rate hike, but what the Fed is planning next.”

Nouriel Roubini, who correctly predicted the 2008 financial crisis, sees a “long and ugly” recession at the end of 2022 that could last all of 2023 and a sharp correction in the S&P 500. “Even in a vanilla recession, the S&P Is 500 can drop 30%,” said the chairman of Roubini Macro Associates. In a “really hard landing,” he hopes, a 40% drop could occur.

However, some professional speculators are refusing to surrender to a punishing equity market prone to volatility — bolstering bullish and bearish positions at the fastest rate in five years. As the S&P 500 fell last week, hedge funds shorted individual stocks as they bet against the broad market with products like exchange-traded funds, data from prime brokerage Goldman Sachs Group Inc. showed.

Christopher Smart, chief global strategist for Barings LLC, said equity markets faced further stress due to weaker valuations although certain corners of the credit markets remained attractive. “Investment grade and high yield are places where my colleagues are finding a lot of opportunity,” he said on Bloomberg Television. “The fundamentals of the US economy are very strong. They have to weaken a bit to cool some of these inflationary pressures, but you can find a lot of companies with strong balance sheets.”

This week’s highlights:

  • Federal Reserve decision, followed by a news conference with Chairman Jerome Powell, on Wednesday

  • Big Bank CEOs testify before the US Congress in a pair of hearings on Wednesday and Thursday

  • Current US home sales, Wednesday

  • EIA crude oil inventory report, Wednesday

  • Bank of Japan monetary policy decision, Thursday

  • Bank of England interest rate decision, Thursday

  • The US Conference Board’s leading index, initial jobless claims, Thursday

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Some of the main moves in the markets:

Stock

  • S&P 500 futures fell 0.3% as of 8:03 am 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 slipped 1.4%

  • Hang Seng Index fell 1.6%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.4%

  • The euro fell 0.7% to $0.9897

  • The Japanese yen was at 143.58 per dollar

  • The offshore yuan fell 0.4% to 7.0614 against the dollar

Bonds

Commodities

  • 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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