European stocks rise with US equity futures, oil fluctuates

Bloomberg

European stocks ticked higher with US futures, while Treasuries extended their slide as investors weighed the risks of rising inflation and the impact of the war in Ukraine. Oil fluctuated and the dollar edged higher.
The Stoxx Europe 600 Index rose 0.2%, with utilities the best-performing sector and technology the worst. Shares in Russia advanced as they partially resumed trading after being closed for almost a month.
Treasuries resumed their slide, while a stretch of the yield curve reached its flattest level in 15 years. The inversion of parts of this curve point to a mounting risk of a growth downturn. Japan’s 10-year government bond yields rose to a level that prompted the Bank of Japan to step in with unlimited fixed-rate bond buying operations last month. The yen touched a six-year low.
Global benchmark Brent swung between gains and losses near $123 a barrel on reports that the US and European Union are close to a deal aimed at slashing Europe’s dependence on Russian energy, while President Joe Biden prepares to announce new sanctions on Russia. Nickel prices vaulted to the maximum daily limit on the Shanghai Futures Exchange despite a cloudy short-term demand outlook due to Covid-19 restrictions in China.
The extreme volatility in commodity markets caused by the conflict and global response is sapping liquidity, according to some of the world’s biggest trading houses.
Markets are roiling as Federal Reserve officials signal they won’t shy away from more-aggressive action to tame the fastest inflation in four decades. Commodity prices have staged erratic rallies amid supply pressures and sanctions as Russia’s attacks on Ukraine show no sign of abating, and mounting concerns about the impact on the global economy leave investors struggling to identify havens. A sharp rotation from bonds to equities, which had emerged as an attractive inflation hedge after their steep selloff, may be losing momentum.
“Markets are really latching onto these short-lived themes and that’s causing significant price movement,” Tracie McMillion, head of global asset allocation strategy at Wells Fargo Investment Institute, said on Bloomberg Radio. “We think that for the near term we are probably going to be able to avoid a recession but we
are growing a little bit more concerned about 2023.”
She added that some equity investors may be seeing the Federal Reserve’s tougher stance on inflation as a positive, at least for now.
Among the latest hawkish messages from Fed officials, San Francisco Fed President Mary Daly said both a 50 basis-point interest-rate hike and a decision to shrink the balance sheet could be warranted at the next policy meeting in May. St. Louis Fed President James Bullard — speaking at Credit Suisse’s 25th Asian Investment Conference on Thursday — reiterated that the central bank has to “move faster to keep inflation under control.”
“The Fed needs to build up its ammunition,” Teresa Kong, Matthews Asia portfolio manager, said on Bloomberg Television. “Overall global growth
is going to be dampened and they need to be able to cut rates later on should this have a greater-than-expected recessionary effect.”
Russia was expected to restart trading in some local equities on Thursday, ending the nation’s record long shutdown. The ruble staged its biggest one-day gain in years after Russian President Vladimir Putin pushed on with plans to demand that dozens of countries use the local currency for natural gas purchases. As concerns about a Russian debt default mount, steelmaker Severstal appears to have missed
a deadline to make good on
a $12.6 million interest
payment to bondholders.
The Stoxx Europe 600 rises 0.2% as of 8:55 am London time and futures on the S&P 500 also climb 0.6%.
While futures on the Nasdaq 100 gain 0.8%, futures on the Dow Jones Industrial Average also surges to 0.5%.
The MSCI Asia Pacific Index falls 0.5% and the MSCI Emerging Markets Index also drops 0.6%.
While the Bloomberg Dollar Spot Index climbs 0.2%, the euro falls 0.2% to $1.0980 and the Japanese yen also plunges 0.4% to 121.59 per dollar. The offshore yuan was little changed at 6.3839 per dollar and the British pound falls 0.3% to $1.3169.
The yield on 10-year Treasuries advanced five basis points to 2.34% and Germany’s 10-year yield advanced two basis points to 0.49%. Britain’s 10-year yield was little changed at 1.63%