Financial markets began the week with modest moves across assets as investors assessed the latest central bank commentary and developments in Ukraine.
Tech shares drove gains in American stocks, powered by Twitter Inc. The social media company surged as much as 31% after Tesla Inc. Chief Executive Elon Musk took a 9.2% stake in the company. Starbucks Corp. declined after founder Howard Schultz suspended a share-buyback plan. Meanwhile, U.S.-listed shares of Chinese stocks like Baidu Inc. and Tencent Holdings Ltd. rose after China removed a key hurdle to allow the U.S. full access to audits.
“As the first quarter starts to grow distant in the rear view mirror, investors will focus on the early tranche of Q1 S&P 500 results this week ahead of the unofficial start of earnings season,” wrote John Stoltzfus, chief investment strategist at Oppenheimer.
The second quarter kicked off slowly, with investors awaiting Federal Reserve meeting minutes Wednesday and the start of corporate earnings season next week. The yield on the 10-year Treasury gained and the dollar was stronger against peers. WTI crude oil rose above $103 a barrel as traders weighed China’s Covid outbreak and moves to tap strategic reserves.
The Stoxx Europe 600 index fluctuated before ending higher. Consumer-discretionary shares helped lead the gains, with Delivery Hero SE jumping after a profit forecast. Health stocks were also higher as Roche Holding AG climbed after U.S. regulators granted a priority review for its Covid-19 drug Roactemra.
Two-year U.S. Treasury yield exceeds 30-year for first time since 2007
Russian and Ukrainian negotiators are set to resume video talks on Monday, after the European Union condemned Russia for atrocities by its military in several Ukrainian towns and President Joe Biden said Vladimir Putin could face a war crimes trial. That’s dimming hopes of an imminent breakthrough in peace negotiations.
“We’re left hoping that talks continue to make progress toward a ceasefire and exit of Russian troops but if the process so far is anything to go by, that may not happen soon,” said Craig Erlam, senior markets analyst at Oanda Europe Ltd. “While progress has been positive for risk assets so far, they remain vulnerable to setbacks in talks which continue to take place against the backdrop of ongoing attacks.”
The Treasury yield curve is flashing more warnings that economic growth will slow as the Federal Reserve raises rates to tame inflation stoked in part by commodities. The two-year U.S. yield has exceeded the 30-year for the first time since 2007, joining inversions on other parts of the curve. The Fed minutes later this week will shape views on the odds of a half percentage-point rate increase in May and provide key details on how the central bank will shrink its balance sheet.
“Global equity investors started 2022 with the primary concern being aggressive central banks. However, the brutal Russia/Ukraine war delivered the final punch that sent many global indexes near bear market territory,” Megan Horneman, chief investment officer at Verdence Capital Advisors, said in a note. “Bond investors felt the pain of the end of the Fed’s easy monetary policy as the Fed raised rates for the first time since 2018. Equity investors were whipsawed with many indexes in contraction territory.”