Pre-market: Wall Street down as Russia and Ukraine plan talks
U.S. markets were heading lower on Tuesday after talks between Russia and Ukraine aimed at ending the war only resulted in an agreement to meet again.
On Wall Street, S&P 500 and Dow Jones futures fell 0.7%. Major European indices fell sharply while Asian stocks were mostly up. Oil prices continue to soar and US benchmark crude broke above $100 for the first time since the summer of 2014.
A 40-mile Russian tank convoy threatened the Ukrainian capital Kiev on the sixth day of the war as the Kremlin grew increasingly isolated.
An initial five-hour session of talks ended with an agreement for another meeting in the coming days, although embattled Ukrainian President Volodymyr Zelenskyy said he believed the increased shelling by Russian troops was aimed at force him to make concessions.
Russia is a major energy producer and soaring oil prices and mounting financial pressure from the United States and its allies on Russia for its invasion of Ukraine have added uncertainty to the global economic outlook. .
“While the ceasefire talks on the Belarusian-Ukrainian border have come to an end, military fire has certainly not stopped, alongside the lifting of sanctions,” said Tan Boon Heng of the Mizuho Bank in Singapore in a comment.
The French CAC 40 lost 3% while the German DAX lost 2.7%. Britain’s FTSE 100 fell 1.3%.
Japan’s benchmark Nikkei 225 gained 1.2% to end at 26,844.72. Australia’s S&P/ASX 200 jumped 0.7% to 7,096.50. Hong Kong’s Hang Seng added 0.2% to 22,761.71, while the Shanghai Composite rose nearly 0.8% to 3,488.83. Markets were closed in South Korea for a holiday.
“The market will continue to focus on geopolitical tensions, at least in the short term,” ActivTrades’ Anderson Alves said in a report.
The value of the Russian ruble fell to a record low on Monday after Western countries moved to block some Russian banks from a key global payment system. Also on Monday, the US Treasury Department announced new sanctions against the Russian central bank.
The ruble was trading at 97 to the dollar on Tuesday, up more than 10% from its nadir of 108.02 to the dollar a day earlier. Russian markets, after closing early on Monday, remained closed on Tuesday.
Governors and lawmakers in many U.S. states, seeking to aggravate financial pressure on Russia, were taking steps to withdraw state pension and cash funds from investments in Russian-owned entities or Russian-supporting companies. the war.
Various companies have announced plans to downsize or withdraw from business in Russia, or suspend operations in Ukraine due to the conflict.
Investors were already nervous ahead of the Russian invasion ahead of Federal Reserve plans to raise interest rates for the first time since 2018 to counter inflation.
The Fed is on a tightrope, needing to raise rates enough to rein in inflation, but not enough to suffocate the economy into a recession. Higher rates also put downward pressure on various investments, from stocks to cryptocurrencies.
The war in Ukraine is raising expectations that the Fed and other central banks may need to take a softer-than-expected approach to raising interest rates.
Seeking safer returns, investors invested in US government bonds. The 10-year Treasury yield fell 0.15 percentage points on Monday to 1.83%, its biggest drop since the omicron variant of the coronavirus first rattled investors.
The 10-year Treasury note was at 1.73% early Tuesday.
Fed Chairman Jerome Powell is due to testify before Congress later this week and could offer some clues on the way forward. A report on Friday will also show whether US job market strength continued in February, giving the Fed more room to raise rates.
In energy trading, benchmark U.S. crude added $4.69 to $100.21 a barrel in electronic trading on the New York Mercantile Exchange. It jumped from $4.13 to $95.72 on Monday.
Brent crude, the international standard, rose $5.17 to $103.04 a barrel. Oil prices on both sides of the Atlantic have risen amid concerns about what will happen to crude supplies.
In currency trading, the US dollar fell to 114.76 Japanese yen from 114.99 yen. The euro slipped to $1.1174 from $1.1219.