Most markets shared solid ground and oil fell on Monday on hopes of making progress in Russia-Ukraine peace talks even as fighting continued. sharply, while the bond market braced for rate hikes in the US and UK this week.
While the Russians attacked a major Ukrainian base near the border with Poland on Sunday, both sides offered their most optimistic assessment of the prospects for negotiations. read more
Just a peaceful chance saw the price of S&P 500 stock futures rise 0.5%, while Nasdaq futures rose 0.4%. EUROSTOXX 50 futures gained 0.5% and FTSE futures gained 0.2%.
Tokyo's Nikkei (.N225) was up 0.9%, but the MSCI index of Asia-Pacific shares, the broadest outside of Japan (.MIAPJ0000PUS) was dragged down 1.6% on losses in China. .
China's blue-chips (.CSI300) fell 1.7% after a spike in coronavirus infections saw the southern city of Shenzen shuttered and sparked speculation of more policy easing. read more
Bonds elsewhere remain under pressure after falling sharply last week as higher commodity prices look set to spur inflation further, with 10-year yields rising 4 basis points to 2.04%.
Notably, a key measure of the U.S. inflation expectations rose to 3% and near a record high.
That only reinforces expectations the Federal Reserve will raise interest rates by 25 basis points at their policy meeting this week and signals more through members' "dot plot" forecasts. .
"The dots will likely be mostly focused on around four or five increases for 2022, up from the previous three, driven by stronger inflation rates since the last recession," said Kevin Cummins, US director. January meeting of the FOMC". Economist at NatWest Markets.
"We suspect we could also get an addendum on how the Fed plans to reduce the size of its balance sheet as early as this week."
The Bank of England is expected to raise interest rates to 0.75% on Thursday, the third hike in a row and signaling more with the market pricing in a strong 2% year-end. read more
Fed funds futures imply no less than six or seven increases this year to around 1.75%, keeping the US dollar consolidated near its highest since May 2020.
The euro was stuck at $1.0905 and not far from the recent 22-month low of $1.0804, while the dollar hit a five-year high against the yen at 117.87.
The Bank of Japan is seen as lagging far behind other major central banks in tightening policy.
"The yen has been unable to display its typical safe-haven attributes, partly due to the large increase in US yields and the BoJ's yield curve control policy preventing the JGBs from following suit. momentum in global core yields," said Rodrigo Catril, a senior. Forex Strategist at NAB.
"Japan is also a major energy importer, adding to concerns about a trade shock caused by higher energy prices."
Gold lost some of its safe-haven appeal on Monday, falling 0.5% to $1,975 an ounce and heading to last week's peak of $2,069.
Likewise, the opportunity for progress for Ukraine has led oil prices to recover slightly from their recent gains, even as talks with producer Iran appear to be stalled. read more
Brent was last quoted $2.13 lower at $110.54, while U.S. Crude oil fell $2.46 to $106.84.