U.S. equity futures moved lower Monday, while the dollar gained ground against its global peers and oil prices moved sharply higher, as Russia’s attack on Ukraine intensified and talks aimed at brokering peace between Moscow and Kyiv appeared to bear little fruit over the weekend.
With Russia’s invasion, which began nearly a month ago as a “special operation” ordered by President Vladimir Putin, nearing the Ukrainian capital, United Nation’s observers estimate that more than 10 million people have been displaced by the fighting, which has taken the lives of thousands of civilians as well as high-level figures in the Russian military.
However, with hopes of progress in talks between the two sides last week fading, investors are now left to ponder the impact of the war in both human and economic terms, with many retreating from risk markets and into cash and defensive positions.
Benchmark 10-year Treasury note yields held at 2.185% in overnight trading, while 2-year notes were marked at 1.986%, putting the difference between the two at around 21.5 basis points, the lowest since the pandemic trough of April 2020.
Meanwhile, the U.S. dollar index, which tracks the greenback against a basket of six global currencies, gained 0.14% to to 98.36 as investors extend bets on faster Fed rate hikes while looking towards a slowdown in growth in the world’s biggest economy.
The CME Group’s FedWatch is pricing in a 41% chance of a 50 basis point hike in June, up from just 27% last week, while the Atlanta Fed’s GDPNow forecasting tool suggests a modest 1.3% first quarter advance.
The defensive tone will take some of the steam out of last week’s rally, the strongest five-day session for the S&P 500 since November of 2020, sparked in part by the long-awaited clarity from the Federal Reserve’s interest rate hike and near-term policy path.
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“After the major bounce last week, this week looks pivotal for whether this represents a significant shift or whether markets will continue to fret that the recent shocks will set the global economy and corporate profits on the path to recession,” said Saxo Bank strategists.
On Wall Street, futures futures contracts linked to the Dow Jones Industrial Average are indicating a 75 point opening bell dip while those linked to the S&P 500, which is down 6..4% for the year, are priced for a 1 point move to the upside. The tech-focused Nasdaq Composite is called 10 points lower.
Boeing (BA) – Get Boeing Company Report shares slumped 8% in pre-market trading — essentially pulling the Dow into negative territory — following the crash of a 737-800 passenger jet operated by China’s Eastern Airlines.
The six-year old plane was carrying 132 passengers, including crew, on a routine flight between Kunming to Guangzhou when it crashed into mountains in the southern region of the country, China’s Civil Aviation Authority said at around 4 am Eastern time. If fatalities are ultimately confirmed, it will be the first deadly crash of a commercial plane in China since 2010.
The incident could also add further delays to Boeing’s return of the grounded 737 MAX aircraft in China, the world’s biggest market, as investigators probe the circumstances behind Monday’s disaster.
Alleghany Corp. (Y) – Get Alleghany Corporation Report shares, meanwhile, soared 25% after Warren Buffett’s Berkshire Hathaway (BRK.A) – Get Berkshire Hathaway Inc. Class A Report agreed Monday to buy insurance group for around $11.6 billion as the investment group adds to its 2022 acquisition run while quietly surpassing the $500,000 share price benchmark.
In other markets, global oil prices climbed higher again Monday, taking U.S. crude closer to $110 per barrel, as European officials mulled an embargo on Russia exports and rebel troops attacked a key pipeline in Saudi Arabia.
WTI futures for April delivery rose $4.54 in overnight trading to change hands at $109.24 per barrel while Brent contracts for May were last seen $3.89 higher at $111.84 per barrel.
Europe’s Stoxx 600, which is down 6.76% for the year, was marked 0.05% higher on the session in Frankfurt, while the region-wide MSCI ex-Japan benchmark ended the day with a 0.83% pullback.