Stocks will struggle to hold onto yesterday’s gains, the strongest in two years, as oil prices resume their upward march ahead of a key reading of February inflation before the opening bell.
Updated at 8:42 am EST
U.S. equity futures moved lower again Thursday as markets failed to hold onto the sentiment that triggered the strongest single-day gain in two years amid a renewed leap in oil prices and little hope of a peaceful conclusion in the now three week war between Russia and Ukraine.
Foreign Ministers from both sides met in Ankara, Turkey today to end what is now being called a humanitarian crisis in the region, with more than 2 million refugees displaced, thousands of civilians killed and crippling economic sanctions imposed on Moscow.
The lack of positive messages from the talks, the first since the conflict began three weeks ago, unnerved European stocks Thursday and added further upward pressure to oil prices, with WTI crude futures for April delivery rising $4.46 to $113.16 per barrel.
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The dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.25% higher at $98.208 in safe-haven overnight trading, pushing gold back below the $2,000 mark.
Europe’s Stoxx 600 was marked 3% lower by early afternoon in Frankfurt as investors reacted to a surprise move by the European Central Bank’s to end emergency bond buying by the third quarter as policymakers wrestle with the specter of surging inflation and slowing economic growth in the world’s biggest economic bloc.
“The balancing act faced by the ECB is an extremely challenging one,” said Paul Craig, portfolio manager at Quilter Investors. On the one hand, the bloc is faced with an inflationary shock that requires quick and decisive action. On the other, the attempted Russian invasion of Ukraine has cast a shadow of uncertainty over Europe that could end with weak demand and recession.
“So the ECB has opted for the path of least resistance, and will take a middle ground by announcing a gradual reduction in asset purchases while avoiding a firm commitment on the eventual end date,” he added.
The very same issues will be faced by the Federal Reserve next week, in fact, and today’s reading of February inflation will underscore the impact of high energy prices on the overall CPI reading, which came in at a 40-year high of 7.9%.
So-called core inflation, which strips-out volatile components such as food and energy prices, rose 0.5% on the month, and 6.4% on the year, the highest since February of 1991, the report noted, with the annual reading coming in ahead of the Street consensus forecast.
However, with gas and energy prices continuing to surge amid concerns over supply disruption linked to Russia’s war on Ukraine, as well as energy export sanctions on Moscow, higher inflation readings are expected to linger for several months, adding further complications to the Fed’s plans on interest rate hikes to combat them for fear of choking off growth prospects in the world’s biggest economy.
On Wall Street, futures contracts linked to the Dow Jones Industrial Average are indicating a 340 point opening bell decline while those linked to the S&P 500, which is down 10.25% for the year, are priced for a 41 point slump.
Nasdaq Composite futures are indicating a 161 point pullback as benchmark 10-year Treasury note yields rise to $1.951% in overnight trading.
Amazon (AMZN) – Get Amazon.com, Inc. Report shares were an active early-market mover, rising 4.5% after after the world’s biggest online retailer approved a 20-for-1 stock split and a $10 billion share repurchase plan.
Tesla (TSLA) – Get Tesla Inc Report shares moved lower, but largely in-line with broader market moves for the Nasdaq, after it unveiled price hikes for its clean-energy cars in the U.S. and China.
General Electric (GE) – Get General Electric Company Report shares, meanwhile, fell 1.5% after the industrial group reaffirmed its reduced profit forecasts ahead of an investor day presentation in Greenville, South Carolina as input costs and supply chain disruptions continue to test its ongoing turnaround under CEO Larry Culp.
Overnight in Asia, the region-wide MSCI ex-Japan index followed Wall Street’s gains with a 1.8% leap, while the Nikkei 225 in Tokyo surged 3.94% to close at 25,690.40 points.
