Peace talks between delegations from Russia and Ukraine at Dolmabahce Presidential Office in Istanbul, Turkey on March 29, 2022.
Cem Ozdel/Anadolu Agency via Getty Images
- US futures and European stocks fell Wednesday after the Russia-Ukraine peace talks and ahead of US ADP private payrolls data.
- Skepticism over Russia’s intentions and the success of Tuesday’s peace talks dragged stocks lower, while oil gained.
- Investors were looking towards data on private-sector employment for March, due later in the day.
US stock futures and European stocks dipped on Wednesday, as investor skepticism grew over apparent progress in peace negoitations between Russia and Ukraine, which in turn pushed up the oil price.
Russia said on Tuesday it would agree to reduce military action near the Ukrainian capital of Kyiv and take steps to de-escalate the conflict. Stocks rallied on the news, while the oil price fell to just above $100 a barrel. But this was quickly met by skepticism from the West and Ukraine, which on Wednesday lessened risk appetite and weighed on markets like equities.
Futures on the S&P 500 fell 0.43%, Dow Jones futures dipped 0.36%, and Nasdaq futures dropped 0.57%, indicating a weaker start to trading later on.
European stocks, which have been more sensitive to events in the region, also declined. The pan-European Stoxx Europe 600 fell 0.88%, the UK’s FTSE 100 dropped 0.11%, Germany’s DAX dropped 1.47%, and the French CAC 40 lost 1.16%.
“As nice as the peace talks initially sound, there’s scepticism over Russia’s true intentions,” Matt Simpson, senior market analyst at City Index, said. “They haven’t been true to their word with humanitarian corridors, and it’s possible their pledge to scale down their ‘military operations’ around Kyiv is simply a ploy to disperse their troops elsewhere.”
Oil gained, driven by ongoing concern that a protracted war in Ukraine could prompt the West to impose tough sanctions on Russia’s energy exports. The EU, which relies heavily on Russia for both natural gas and crude oil, is still considering whether or not to apply some kind of ban. Russia produces around 10% of the world’s daily crude oil and exports around three quarters of that total.
The oil price is still heading for its largest weekly decline since late November, but on Wednesday, Brent crude rose by almost 2.00% to $109.78 a barrel, while WTI also gained 2% to trade around $106.22.
The near-20% rise in the value of oil since Russia invaded Ukraine in late February has heightened concern among investors and central bankers about an energy-price shock in a global economy where inflation is already running at decades-long highs.
Investors expect fairly aggressive interest-rate rises from the world’s major central banks, including the Federal Reserve, the Bank of England and the European Central Bank. As a result, bond yields have surged as investors have ditched fixed-income assets, which underperform in an environment of rising rates.
US 10-year Treasurys are trading around their highest in three years, having risen by almost 60 basis points in the last month alone. On Wednesday, the 10-year yield was up 1 basis point at 2.407%.
Investors are also awaiting the release of private-sector employment from payrolls company ADP later on Wednesday. Economists expect to see an increase of 450,000 in March, which in theory, could suggest Friday’s bigger non-farm payrolls report may also show healthy growth, although the two do not always move in lockstep.
“The March ADP employment report, also from the States, will be of more interest, despite its somewhat tenuous link with Friday’s official labour market data, and is set to show around 450k private sector jobs having been added,” Caxton FX strategist Michael Brown said.
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