Although the US government has warned that Russia’s latest move was a sign that it is redeploying, not withdrawing, troops, investors are still accumulating risky assets, ignoring rising inflation and forthcoming interest rate hikes that could affect growth prospects and reverse the stock market rise. In a sign that the stock market is heading for headwinds, part of the closely monitored U.S. yield curve reversed for the first time since September 2019, signaling a possible recession in the future. [nL2N2VW227] Sign up now for FREE unlimited access to Reuters.com Register Indeed, some analysts have warned that the latest period of optimism may be misplaced. “Over the past two weeks, S&P has recorded one of the strongest rallies in its history, the largest 10-day rally in seven of the S&P 11 bear markets since 1927,” said analysts at Bank of America Global Equity Derivatives Research . “It did so despite the clearly weaker fundamentals (more growth, higher inflation and a reversal of the curve) and the Fed leaning towards stock market power to grow faster,” they wrote, adding that they believe sustainable US gains are amazing. US stocks jumped more than 1%, major European stocks were up 1% to 2.5% and oil fell close to $ 5 a point as Russia’s deputy defense minister appeared to say Moscow had decided to cut sharply. military activity around the Ukrainian capital Kyiv and also Chernihiv. read more With Tuesday’s rally, Wall Street – with the help of data showing a recovery in US consumer confidence in March – rose for the fourth consecutive day. Asia also rose overnight after the Bank of Japan defended its huge economic stimulus program, although the worst month of the yen since 2016 was still a cause for concern. read more / FRX Traders also rejected the larger-than-expected drop in consumer confidence data in France and Germany and signs that Russia would move ahead with plans to start charging for gas in rubles and was prepared to risk a historic public bankruptcy. debt. read more The yield on Germany’s 10-year benchmark bond – the main indicator of European borrowing costs – reached its highest level since early 2018 and 2-year yields became positive for the first time since 2014, adding to seismic changes in global interest rate markets this year. inflation has swelled. Yields on US bonds stopped rising on Tuesday, but rose dramatically by 165 basis points this quarter. The benchmark index of 10-year US bonds fell to 2.391% while the equivalent 2-year yields were at 2.367%. More than 200 basis points for US interest rate hikes are also now being valued for 2022, which, if realized, would be the largest in a calendar year since 1994. The difference between the 2 and 10 year government yields, which is being monitored as a harbinger of a recession, fell slightly to less than 0.03 of the base unit on Tuesday, as traders bet that the aggressive tightening by the Federal Reserve could hurt the economy. long term. This so-called curve reversal is considered a reliable predictor of recession, although some analysts say the curve has been distorted by quantitative easing and investors should not study it too much. The Fed also urged investors to watch other parts of the curve that are still steep, giving it room to tighten policy further and faster. “We have seen something a bit unprecedented, because the Fed is suddenly facing a question about its credibility and whether it can effectively reduce inflation,” said Francesco Sandrini, Amundi ‘s chief asset strategist. He added that Amundi had revised its forecast for European growth down to 1.5% for the year from 2% previously, but could be lower if the situation continued to deteriorate. “We strongly question our forecasts,” Sandrini said, especially as Europe’s big companies are more exposed to commodity pressures than their US counterparts. “It’s extremely complicated, we have to be careful.” Oil, gas, wheat and corn prices have soared COVERED GEN The Dow Jones Industrial Average (.DJI) jumped 0.97%, the S&P 500 (.SPX) jumped 1.23% and the Nasdaq Composite (.IXIC) rose 1.8%. MSCI World Index (.MIWD00000PUS) gained 1.54%. All three of the major S&P 500 indices, the Dow Jones and the Nasdaq, are set to close higher in March. However, they are also going to record the worst start of a year and even every quarter since the beginning of 2020, when the outbreak of the coronavirus pandemic wreaked havoc on the financial markets. In the foreign exchange market, the yen continued to fall to 122.88 yen per dollar, even after a slight recovery from its fall the previous day, when the Bank of Japan promised to buy unlimited 10-year government bonds to prevent a rise of the yields on its bonds. much further. However, the central bank was having a hard time. The yield on the 10-year JGB stood at 0.245%, just above the BOJ’s tacit 0.25% ceiling. Among commodities, oil prices reversed some of the day’s losses, which came after Russia’s top negotiator in talks with Ukraine called the talks “constructive.” Brent crude was down $ 2.25, or 2%, at $ 110.23 a barrel, while US crude was down $ 1.72, or 1.6%, at $ 104.24. Prices had weakened earlier as China’s economic hub, Shanghai, tightened its lockdown on COVID-19, reporting 4,381 asymptomatic cases and 96 accidental cases on March 28 – although the burden of cases remains moderate for world standards. read more The gold spot fell 0.2% to $ 1,919.14 an ounce. The difference between the yield on 3-month government bonds and 10-year bonds widened Sign up now for FREE unlimited access to Reuters.com Register Additional References by Selena Li in Hong Kong Edited by Ed Osmond, Andrea Ricci, Jonathan Oatis, Tomasz Janowski and Marguerita Choy Our role models: The Thomson Reuters Trust Principles.
