Stocks soar, oil falls after ‘encouraging’ talks between Russia and Ukraine

NEW YORK, March 29 (Reuters) – Stock markets surged across the world on Tuesday and oil prices fell more than $3 as investors celebrated signs of progress in talks between Russia and the United States. Ukraine which they hoped would lead to a settlement within five weeks. conflict.

US stock indices jumped more than 0.5%, major European exchanges posted gains of 1% to 2.5% and oil fell 4% as Russia’s deputy defense minister announced that Moscow had decided to drastically reduce military activity around the Ukrainian capital kyiv and also around Chernihiv. Read more

Even as the US government warned that Russia’s latest move was a sign of redeployment, not withdrawal, of troops, investors nonetheless piled into risky assets, ignoring soaring inflation and rising prices. impending rates that could harm growth prospects and the strength of the stock market.

Indeed, some analysts have warned that the stock exuberance is overdone and may not last.

“Over the past two weeks, the S&P has produced one of its strongest rallies in history, larger than the biggest 10-day rallies in 7 of the S&P’s 11 bear markets since 1927,” the analysts said. Bank of America Global Equity Derivatives Research analysts.

“It did so despite clearly weaker fundamentals (more bulls, higher inflation, and a curve inversion) and the Fed leaning on stock market strength to rise faster,” they wrote, adding that they believed sustained gains in US equities were unlikely.

With Tuesday’s rally, Wall Street – helped by data that showed a rebound in U.S. consumer confidence in March – is poised for its fourth straight day of gains. Asia was also lifted overnight after the Bank of Japan defended its sweeping stimulus package, though the yen’s worst month since 2016 still raised eyebrows. learn more / FRX

Dealers also shrugged off bigger-than-expected drops in French and German consumer confidence data and signs that Russia will press ahead with plans to start pricing its gas in roubles, and is ready to risk a historic sovereign debt default. . Read more

The benchmark 10-year German Bund yield – the main indicator of European borrowing costs – hit its highest level since early 2018 and 2-year yields turned positive for the first time since 2014, adding to seismic shifts in global interest rate markets this year as inflation rose. leaps.

US Treasury yields halted their ascent on Tuesday, but rose 165 basis points this quarter.

The benchmark 10-year US Treasuries fell to 2.394% while the equivalent 2-year yields were at 2.382%. calendar year since 1994.

The difference between 2- and 10-year Treasury yields, which is seen as a harbinger of recession, narrowed again on Tuesday in another step closer to reversal, as traders are betting that aggressive tightening by the Federal Reserve could hurt the economy in the long run .

This so-called curve inversion is seen as a reliable predictor of recession, although the Fed has urged investors to also watch other curve segments that are still steep, giving it room to tighten further and further. his policy quickly.

“We have seen something a bit unprecedented as the Fed is suddenly faced with a question about its credibility and its ability to effectively reduce inflation,” said Amundi’s head of multi-asset strategies, Francesco Sandrini.

He added that Amundi had revised its European growth forecast down to 1.5% for the year from 2% previously, but it could be lower if the situation continues to deteriorate.

“We question our forecast a lot,” Sandrini said, especially since large European companies are more exposed to commodity price pressures than their US counterparts. “It’s extremely complicated, we have to proceed with caution.”

YEN PATTÉ

The Dow Jones Industrial Average (.DJI) rose 0.24%, the S&P 500 (.SPX) gained 0.40% and the Nasdaq Composite (.IXIC) climbed 0.94%. The MSCI Global Stock Gauge (.MIWD00000PUS) gained 0.98%.

The three major indices S&P 500, Dow Jones and Nasdaq are on track to end March higher. However, they are also expected to record their worst start to the year and indeed any quarter since the start of 2020, when the outbreak of the coronavirus pandemic wreaked havoc on financial markets.

Japanese stocks (.N225) had closed more than 1% higher in Asia overnight, although Chinese stocks and oil both slipped as Shanghai continued to lock down to fight a surge of COVID- 19.

The rally in Tokyo came as the Bank of Japan pledged to maintain its stimulus package, offering to buy unlimited amounts of 10-year government bonds to prevent its bond yields from rising too much.

The central bank, however, had difficulty finding its way around. The 10-year JGB yield came in at 0.245%, just against the BOJ’s implied cap of 0.25%.

That didn’t help the yen much, which was at 122.72 to the dollar, even after a small rally from its bruises the day before.

Among commodities, oil prices fell another $3 as Russia’s top negotiator in the Ukraine talks called the talks “constructive”. That left Brent down 3.2% at $108.85 a barrel and US WTI at $102.86.

Prices had also weakened earlier as China’s financial hub of Shanghai tightened its latest COVID-19 lockdown, after reporting a record 4,381 asymptomatic and 96 symptomatic cases for March 28 – although case numbers remain modest compared to global standards. Read more

Spot gold fell 0.5% to $1,914.20 an ounce.

Additional reporting by Selena Li in Hong Kong, editing by Ed Osmond, Andrea Ricci, Jonathan Oatis and Tomasz Janowski

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