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Stocks, Futures Fall on Inflation Fears; Oil Rises: Markets Wrap

David Crew April 18, 2022

(Bloomberg) — Stocks and U.S. equity futures fell Monday, while Treasury yields rose, as a jump in energy costs again highlighted the inflation concerns that are weighing on the global economy.

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Japanese shares slid along with S&P 500 and Nasdaq 100 contracts. Treasuries dropped on the prospect of rapid Federal Reserve monetary tightening to curb price pressures, pushing the U.S. 10-year yield to about 2.86%. A gauge of the dollar advanced and the yen retreated.

Natural gas and oil climbed, partly on risks from Russia’s war in Ukraine. The possibility of a de facto European Union embargo on Russian gas and the threat of some curbs on crude in Europe’s next sanctions package spurred both commodities. U.S. natural gas prices hit a more than 13-year high.

China is due to release quarterly growth data and activity indicators for March, which may provide hints about the economic damage from Covid lockdowns. Officials cut the reserve requirement ratio Friday but refrained from lowering interest rates in a cautious approach to policy easing.

China’s Covid-linked restrictions are snarling supply chains and stoking global inflation pressures. The latter were already exacerbated by disruptions to commodity flows due to the war and Russia’s isolation. Concern is growing that the U.S. economy faces a downturn from the Fed’s pivot toward aggressive policy tightening to contain the cost of living.

“Major regime change is rarely smooth in either geopolitics or economics, and markets are under-pricing these risks,” Eric Robertsen, chief strategist at Standard Chartered Bank Plc, wrote in a note. “We are increasingly concerned about a summer of turbulence and volatility.”

In Shanghai, officials published plans to resume production after a prolonged lockdown. Businesses should adopt so-called closed-loop management, where workers live on-site and are tested regularly, they said.

What to watch this week:

  • Earnings include American Express, Bank of America, Bank of New York Mellon, China Telecom, IBM, Johnson & Johnson, Netflix, Tesla

  • China GDP, economic activity data, Monday

  • Easter Monday market closures in the U.K., much of Europe

  • IMF/World Bank spring meetings start, Monday

  • St. Louis Fed President James Bullard to speak, Monday

  • Chicago Fed President Charles Evans to speak, Tuesday

  • EIA crude oil inventory report, Wednesday

  • China loan prime rates, Wednesday

  • Federal Reserve Beige Book, Wednesday

  • French presidential election debate, Wednesday

  • San Francisco Fed President Mary Daly, Chicago Fed President Charles Evans, due to speak, Wednesday

  • Eurozone CPI, U.S. initial jobless claims, Thursday

  • Fed Chair Jerome Powell, ECB President Christine Lagarde discuss global economy at IMF event, Thursday

  • Manufacturing PMIs: Eurozone, France, Germany, U.K, Friday

  • Bank of England’s Andrew Bailey to speak, Friday

Some of the main moves in markets:

Stocks

  • S&P 500 futures fell 0.6% as of 9:29 a.m. in Tokyo. The S&P 500 dropped 1.2% on Thursday

  • Nasdaq 100 futures declined 1.1%. The Nasdaq 100 slipped 2.3% on Thursday

  • Japan’s Topix index fell 1%

  • South Korea’s Kospi lost 0.2%

Bonds

  • The U.S. 10-year yield rose three basis points to 2.86%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.2%

  • The euro was at $1.0805

  • The yen was at 126.75 per dollar, down 0.2%

  • The offshore yuan was at 6.3844 per dollar

Commodities

  • West Texas Intermediate crude rose 0.8% to $107.78 per barrel

  • Gold was at $1,985.93 an ounce, up 0.4%

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