Stocks in Europe rally along with US futures; bonds fall

Bloomberg

Stocks in Europe rallied along with US futures after Bloomberg reported that the European Union is considering joint bond sales to help counter the fallout from Russia’s invasion of Ukraine. Bonds dropped and the euro strengthened.
The Stoxx Europe 600 index reversed an early decline to climb more than 1%, set for its first advance in four days as the possibility of further central-bank stimulus lifted sentiment. Futures on the S&P 500 and Nasdaq 100 also turned higher. The 10-year Treasury yield jumped seven basis points and those on German bunds rose nine basis points. The spread between 10-year Italian and German yields — a key gauge of risk in the euro region — tightened.
The bond-sale proposal may be presented as soon as next week, according to officials familiar with the preparations. The extraordinary move comes just a year after the EU launched a 1.8 trillion-euro ($2 trillion) emergency package backed by joint debt to finance member states’ efforts to deal with the pandemic. Now, the bloc faces massive financing needs as it begins to reform its military and energy infrastructure following Russia’s invasion of Ukraine.
In the US, lawmakers are moving toward barring imports of Russian oil. Russia for its part threatened to cut natural gas supplies to Europe via the Nord Stream 1 pipeline. That underlines how the conflict and
economic warfare against resource-rich Russia are dimming the global outlook.
Tightening monetary policy to contain inflation presents further challenges. The gap between two-year and 10-year Treasury yields is around the narrowest since March 2020, a sign of expectations of slowing economic expansion. Meanwhile, the average price of gasoline in the US rose to a record.
“It’s all about slowing growth and rising inflation,” Alifia Doriwala, Rock Creek co-chief investment officer, said. “With the sanctions on Russia intensifying, it’s hitting all sectors. Then you are going to have some central bank action amidst uncertain economic growth.”
Oil in New York pushed past $122 a barrel on fears of disarray in commodity flows stemming from the war in Ukraine and sanctions on Russia. European gas futures jumped as much as 32% after Russia threatened to cut natural gas supplies to Europe via the existing Nord Stream pipeline.
Meanwhile, the London Metal Exchange suspended trading in nickel after a short squeeze that drove the metal’s price as much as 111% higher. Russia’s MMC Norilsk Nickel PJSC is the largest producer of the metal, used to make stainless steel and car batteries.
Talks between Ukrainian and Russian officials have made limited progress so far on negotiating a cease-fire but the discussions are expected to continue. Russian President Vladimir Putin said Kyiv must agree to his demands.
The ruble was indicated as much as 25% higher versus the dollar in offshore trading before paring the gain. That may reflect disagreements between European Union governments on whether to follow the US in seeking a ban on imports of oil from Russia.
The Stoxx Europe 600 rose 0.6% in London. Futures on the S&P 500 were little changed. Futures on the Nasdaq 100 fell 0.1%. Futures on the Dow Jones Industrial Average were little changed. The MSCI Asia Pacific Index fell 1.7%. The MSCI Emerging Markets Index fell 1.2%.
The Bloomberg Dollar Spot Index was little changed. The euro rose 0.3% to $1.0889. The Japanese yen fell 0.2% to 115.53 per dollar. The offshore yuan was little changed at 6.3218 per dollar. The British pound was little changed at $1.3096. The yield on 10-year Treasuries advanced seven basis points to 1.85%.
Germany’s 10-year yield advanced nine basis points to 0.07%. Britain’s 10-year yield advanced seven basis points
to 1.37%.
Brent crude rose 2.3% to $126.10 a barrel. Spot gold rose 0.5% to $2,008.98 an ounce.