Stocks drop, bonds advance amid Fed, Ukraine concerns

Bloomberg

Equities in Europe declined on Monday and US futures reversed gains as the rout in technology stocks deepened amid concerns over the Federal Reserve’s imminent rate liftoff. Bonds gained.
Tech stocks were among the largest decliners as the Stoxx Europe 600 index dropped almost 2%, on track for the biggest two-day slump since October. Tensions between Russia and Ukraine exacerbated the risk-off mood, with Russia’s benchmark stock index tumbling as much as 4.4% and European shares with exposure to the region also under pressure.
US equity futures edged lower, dimming hopes of some respite after one of the worst stretches for global shares last week since the pandemic began. Contracts on the tech-heavy Nasdaq 100 turned lower after climbing as much as 1% earlier. The Treasury 10-year yield dipped along with rates on most European bonds. A dollar gauge ticked higher.
The Fed on Wednesday is expected to signal a March hike in interest rates and balance-sheet reduction later this year to help fight inflation. Ebbing stimulus is forcing a rethink about the economic and the market outlook.
Aside from the Fed and Ukraine, earnings updates from titans such as Apple Inc. will shape sentiment too in the days to come following an uneven start to the reporting season. Tech stocks have borne the brunt of an equity selloff this year, while some less richly valued parts of the market have held up better.
There is “likely a longer term rotation toward value stocks measured in quarters, not weeks” unfolding, Julian Emanuel, chief equity and quantitative strategist at Evercore ISI, wrote in a note. “Investors should retain a balanced view, staying patient in committing new capital to equities.”
Goldman Sachs Group Inc. economists said they see a risk the Fed will tighten monetary policy more aggressively this year than the Wall Street bank now anticipates.
“A March lift-off and four hikes in 2022 are already fully priced in,” said Xavier Chapard, global macro strategist at Credit Agricole CIB. “But we expect Chair Powell to remain hawkish and not offer any pushback. Not supportive for risky assets.”
In the volatile cryptocurrency sector, bruised Bitcoin fell below $34,000, extending a plunge over the past three days. Digital coins have shed more than $1 trillion in value since a November high.
The Stoxx Europe 600 falls 1.3% as of 9:08 am London time and futures on the S&P 500 rise 0.3%. While futures on the Nasdaq 100 climb 0.4%, futures on the Dow Jones Industrial Average also surge 0.2%. The MSCI Asia Pacific Index falls 0.7% and the MSCI Emerging Markets Index also drops 1.3%.
The Bloomberg Dollar Spot Index was little changed and the euro falls 0.1% to $1.1327.
While the Japanese yen rises 0.1% to 113.54 per dollar, the offshore yuan also climbs 0.1% to 6.3336 per dollar. The British pound falls 0.1% to $1.3535.
The yield on 10-year Treasuries declined three basis points to 1.73% and Germany’s 10-year yield declined three basis points to -0.09%. Britain’s 10-year yield declined five basis points to 1.12%.
Brent crude rises 0.4% to $88.22 a barrel and spot gold also gains 0.3% to $1,841.29
an ounce.