U.S. equity futures bumped higher Tuesday, while the dollar held firm against its global peers as Treasury yields continued to gain, as global markets focused on the first face-to-face peace talks between Russia and Ukraine in more than three weeks.
Turkish President Tayyip Erdogan welcomed officials from both sides of the month-long conflict to Istanbul Tuesday, and while few expect a breakthrough agreement as Russian shells continue to rain down on cities in eastern Ukraine, the sit-down does mark an important step in brokering a near-term ceasefire.
At the time time, Deputy U.S. Treasury Secretary Wally Adeyemo will lead a delegation of U.S. officials for another meeting with European officials Tuesday to discuss deeper sanctions on Moscow, including those focused on its export supply chain, although none are likely to directly impact its main energy exports.
Russia, meanwhile is demanding that payments made for its natural gas exports to European markets be made in rubles, and has threated to shut-off supplies to countries unwilling to do so over the coming weeks.
That has helped keep oil prices elevated, even amid demand concerns linked to the ongoing lockdown in Shanghai and China’s broader struggle to control its Covid outbreak, although WTI crude futures for May delivery fell $2.51 in early New York trading to change hands at $103.76 per barrel.
Investors were also closely tracking moves in the bond market, where 10-year Treasury note yields breached the 2.5% mark and key segment of the yield curve is again nearing inversion.
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Benchmark 2-year note yields climbed to as high as 2.435% in overnight trading, before paring that advance slightly and pegging the difference between 2-year and 10-year paper at just 8 basis points.
A move higher in 2-year yields, usually linked to bets on higher Fed rates, could trigger the first ‘inversion’ of the U.S. yield curve since 2019. If the inversion holds, it’s a move that has signaled each of the last eight recessions.
The CME Group’s FedWatch tool, meanwhile, continues to price in faster Fed rate hikes, and now suggests a 72.2% chance of a 50 basis point move higher at next month’s meeting, with odds of a 50 basis point follow-on hike in June now sitting at 60.1%.
On Wall Street, futures contracts tied to the Dow Jones Industrial Average indicating a 195 point opening bell gain while contracts linked the S&P 500, which is down 4% for the year, but up 4.6% for the month, are priced for a 25 point advance. Futures linked to the tech-focused Nasdaq are looking at a 95 point opening bell gain.
In terms of individual stocks, FedEx (FDX) – Get FedEx Corporation Report shares jumped 2.1% after the world’s biggest package delivery group said its chief operating officer, Raj Subramaniam, would replace longtime boss and company founder Fred Smith as CEO later this year.
Micron Technology (MU) – Get Micron Technology, Inc. Report edged higher ahead of the chipmaker’s second quarter earnings after the closing bell, with investors looking to data center demand to offset weakness in handset and PC markets.
And Nielsen Holdings (NLSN) – Get Nielsen Holdings Plc Report shares soared 21% after a consortium of buyers lead by activist investors Elliott Investment Management agreed to acquire the TV ratings group for $16 billion.
In overseas markets, Europe’s Stoxx 600 was marked 1.3% higher by mid-day trading in Frankfurt, reaching the highest levels in five weeks, while Asia’s MSCI ex-Japan benchmark ended the session 0.8% higher thanks to solid gains for markets in Hong Kong and South Korea.
