Stocks steady on hopes for diplomacy in Ukraine
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[February 18, 2022] By
Tom Westbrook
SINGAPORE (Reuters) - U.S. stock futures
bounced on Friday and selling pressure eased in Asian share markets
after the U.S. Secretary of State agreed to a meeting with Russia's
foreign minister, raising hopes for a diplomatic solution to the
East-West standoff over Ukraine.
S&P 500 futures jumped 0.5% on the news and Nasdaq futures rose 0.6%.
MSCI's broadest index of Asia shares outside Japan was last down 0.5%,
but markets in Tokyo, Hong Kong, Sydney and Seoul all pared deeper
morning losses.[.T][.HK][.KS][.AX]
U.S. Secretary of Antony Blinken has accepted an invitation to meet with
Russian Foreign Minister Sergei Lavrov late next week provided Russia
does not invade Ukraine, the U.S. State Department said.
"It's better news than what we had yesterday," said Kyle Rodda, an
analyst at IG Markets in Melbourne. "But we've seen diplomatic talks go
nowhere before, and the troops are still on the border, so risks
remain."
Wall Street had taken a dive overnight, with the S&P 500 dropping 2.1%
and the Nasdaq off 2.9% - while gold shot to an eight-month peak - on
renewed U.S. warnings of an imminent Russian invasion.
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Investors fear a wider war as one of the deepest crises in post-Cold War
relations plays out, with Russia wanting security guarantees, including
Ukraine's never joining NATO.
Overnight, safe-haven currencies such as the Japanese yen and Swiss
franc climbed to two-week highs on the dollar and they retreated a
little bit in Asia trade. [FRX/]
Treasuries likewise gave back some overnight gains, with the benchmark
10-year yield last up two basis points (bps) to 1.9876%. Two-year yields
also rose two bps to 1.4909%. [US/]
Oil dipped and Brent crude futures were last down 0.5% on Friday at
$92.47 a barrel, more than 4% below Monday's peak, and U.S. crude fell
0.5% to $91.26 a barrel. Gold dipped about 0.4% from its high to $1,889
an ounce. [GOL/]
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A man looks at stock market monitors in Taipei October 8, 2008.
REUTERS/Nicky Loh (TAIWAN)/File Photo
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RATES RACE
Concern about conflict in Ukraine comes with markets already rattled by a rates
outlook that could hold as many as seven Federal Reserve increases in the year
ahead.
St. Louis Fed president James Bullard on Thursday reiterated his call for the
Fed funds rate to be raised to 1% by July to combat stubbornly high inflation
and Fed funds futures price about a 1/3 chance of a 50 bps hike next month to
begin.
Cleveland Fed President Loretta Mester said the pace of hikes will need to be
faster than previous cycles.
"Markets have been particularly volatile recently and virtually everyone
adjusted their Fed hike calls higher," said NatWest Markets' strategist Jan
Nevruzi.
"The consensus seems to range between 5 (our view) and 7 (every meeting) hikes
and I do believe the right number lays somewhere in between. Given the strong
growth trend and elevated inflation, it wouldn't be too surprising to see a hike
at every meeting from now on," Nevruzi said.
On Friday, Japan reported a fifth straight month of inflation, with energy
prices posting their biggest annual rise in 41 years.
Elsewhere in currency markets the dollar held its bid and was firm at $1.1359
per euro and $0.7181 per Aussie.
(Editing by Lincoln Feast)
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