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Euro STOXX 600 falls 0.6% The US bond market marks a future economic downturn Yields on the 10-year bond are lower Ukraine-Russia talks have previously strengthened stocks Down Wall Street
LONDON / NEW YORK, March 30 (Reuters) – US and European stocks stalled on Wednesday as investors tackled economic and geopolitical risks as oil prices soared around $ 4 amid the prospect of more Russian sanctions. The broad Euro STOXX 600 (.STOXX) index fell 0.6% after three positive sessions that had restored the index to the levels it had reached before the Russian invasion of Ukraine. By late morning, the Dow Jones Industrial Average (.DJI) was down 0.18% at 35,229.04, the S&P 500 (.SPX) was down 0.25% and the Nasdaq Composite (.IXIC) was down slightly. Sign up now for FREE unlimited access to Reuters.com Register The MSCI Global Stock Index (.MIWD00000PUS), which tracks stocks in 50 countries, also changed little. The relative cheerfulness among equity investors contrasts with the speculation in the bond market, where some investors are betting that the US Federal Reserve’s aggressive policy tightening could hurt the world’s largest economy in the long run. “I’m very concerned that US stocks are not appreciating the risk of a slowdown in the US economy – this is extremely worrying,” said Ludovic Colin, senior portfolio manager at Swiss Vontobel Asset Management. The broadly monitored yield curve of the US 2-year-10-year bond was briefly reversed on Tuesday for the first time since September 2019. Longer-term yields below the lower ones indicate a lack of confidence in future growth, with 10-year yields falling below the 2-year interest rates widely seen as a harbinger of a recession. Sebastien Galy, senior macroeconomic strategy analyst at Nordea Asset Management, said the fixed income and equity markets are diverging. “Stock markets are overly optimistic and fixed income markets are probably overly pessimistic.” A reversal of the government curve in recent decades has been followed by a recession within two years, including the 2020 recession caused by the COVID-19 pandemic. The benchmarks in Frankfurt (.GDAXI) and Paris (.FCHI) lost 1.5% and 1.1% respectively, with the shares of London (.FTSE) rising to 0.19%. The US yield curve is reversed A day after rising above 0% for the first time since 2014, Germany’s two-year bond yield rose six basis points to 0.01% – keeping the previous day high. Shares rallied in Asia overnight after Ukraine proposed on Tuesday to adopt a neutral regime, a move that investors see as a sign of progress in face-to-face peace talks. read more On the ground, however, reports of attacks continued and Ukraine reacted with skepticism to Russia’s promise in the negotiations to limit military operations around Kyiv. MSCI Asia’s Asia Pacific Index (.MIAPJ0000PUS) jumped 1.46% to its highest level in almost a month, with most Asian stock markets on positive ground. JAPAN IS IN THE FOCUS The 10-year US benchmark yield was last at 2.3762%, having risen to 2.557% on Monday to its highest level since April 2019, as traders pushed for a rapid rise in US interest rates. The impact of rising US yields has been felt elsewhere, dragging Japanese government bond yields into the aftermath as a threat to Japan’s extremely loose monetary policy. The Bank of Japan stepped up its efforts to defend its key yield ceiling on Wednesday, offering to boost government bond markets across the curve, including unplanned market emergencies. read more The widening gap between US and Japanese yields caused the yen to weaken sharply, but managed to regain some lost ground on Wednesday. The Japanese currency rose 0.9% to $ 121.80 against Monday’s low of $ 124.3 amid concerns that the Japanese authorities may intervene to strengthen the yen. In other foreign exchange markets, the euro rose 0.6% to $ 1.1157, the highest level in four weeks, supported by Russia-Ukraine peace talks. In the energy markets, oil prices soared around $ 4 due to supply constraints and the growing prospect of new Western sanctions against Russia, even as Moscow and Kyiv held peace talks. Brent LCOc1 crude futures were up $ 3.96, or 3.6%, at $ 114.19, while US crude was up 3.66% at $ 108.05 a barrel. Sign up now for FREE unlimited access to Reuters.com Register Report by Tom Wilson in London, Additional Report by Dhara Ranasinghe and Alun John in Hong Kong Editing by Bernadette Baum and Mark Potter Our role models: The Thomson Reuters Trust Principles.
