The Dow is looking to snap its longest weekly losing streak in three years as Russia and Ukraine schedule further peace talks and the Federal Reserve readies its Wednesday rate decision.
Updated at 7:35 am EST
U.S. equity futures powered higher Monday, while Treasury bond yields leapt ahead of this week’s Federal Reserve rate decision and oil prices retreated on progress in talks between Russian and Ukraine.
Both sides of the conflict in eastern Europe, which began as a so-called ‘special operation’ by Russian forces, are scheduled to meet again today following weekend talks that yielded at least some progress in terms of establishing a framework for a ceasefire, but were complicated by an attack by Russia near the Polish border and reports that Moscow has reached out to Beijing for support in its military effort as its finances are squeezed by the impact of international business and economic sanctions.
“We are communicating directly, privately to Beijing, that there will absolutely be consequences for large-scale sanctions evasion efforts or support to Russia to backfill them,” said U.S. National Security Adviser Jake Sullivan said. “We will not allow that to go forward and allow there to be a lifeline to Russia from these economic sanctions from any country, anywhere in the world.”
Oil prices retreated sharply in early Monday trading, with WTI crude contracts for April delivery falling $6.21 to $103.12 per barrel, on both optimism linked to negotiations in Ukraine and bets on fading demand from China, where a new outbreak of coronavirus cases is triggering lockdowns in major city centers — including Shenzen, home to 13 million people — despite the government’s ‘zero Covid’ policies.
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Benchmark 10-year Treasury note yields were also on the move, rising to 2.071% in overnight trading, following last week’s reading of U.S. inflation, the fastest in forty years, and ahead of Wednesday interest rate decision from the Fed, which is expected to be the first of between three and five rate hikes between now and the end of the year.
Wednesday’s rate hike, which will lift the Fed Funds rate to a range of between 0.25% and 0.5%, is all but assured from comments from Chairman Jerome Powell earlier this month, with investors now focused on the Fed’s track of inflation data, as well as the changing labor market, for clues on follow-on hikes, with the CME Group’s FedWatch tool putting the chance of a May or June move at around 45%.
In the meantime, markets will digest a key reading on factory gate inflation Tuesday, retail sales on Wednesday, initial jobless claims Thursday and existing home sales data on Friday.
Earnings from FedEx (FDX) – Get FedEx Corporation Report, Nike (NKE) – Get NIKE, Inc. Class B Report and Dollar General (DG) – Get Dollar General Corporation Report round out a muted week in terms of earnings, with markets looking to a sharp slowdown in corporate profit growth — from 32% in the four quarter of last year to just 6.4% over the three months ending in March — to match the Atlanta Fed’s current GDP growth forecast of around 0.5%.
On Wall Street, futures futures contracts linked to the Dow Jones Industrial Average, fresh off its fifth consecutive losing week — the worst in three years — are indicating a 345 point opening bell gain while those linked to the S&P 500, which is down 11.8% for the year, are priced for a 35 point bump.
The tech-focused Nasdaq Composite is looking at a more muted gain of around 70 points as benchmark 2-year Treasury note yields rose to $1.818% in overnight trading.
Bitcoin prices edged high Monday ahead of a key vote by European lawmakers on new regulatory framework for crypto assets that some see as the first step towards an all-out ban on digital coins in the world’s biggest economic bloc.
The European Union’s Economic and Monetary Affairs Committee is set to vote on a policy recommendation known as MiCa, which would demand “minimum environmental sustainability standards” for crypto assets traded in the bloc.
Bitcoin prices were last seen 0.3% higher on the Monday session and changing hands at $39,050.01 each.
In overseas markets, Europe’s Stoxx 600 was marked 1.24% higher by mid-day trading in Frankfurt, paced by auto stocks following stronger-than-expected fourth quarter results from Volkswagen.
In Asia, the region-wide MSCI ex-Japan index fell 2% amid sharp declines for tech and industrial stocks in China, where Covid cases continue to surge, while the Nikkei 225 in Tokyo closed 0.58% higher at 25,307.85 points.
