(Bloomberg) -- U.S. futures fluctuated along with stocks in Europe as the Biden administration prepares to impose a ban on U.S. imports of Russian energy. Treasury yields rose and crude oil climbed.
The U.S. ban, which may come as soon as Tuesday, will include Russian oil, liquefied natural gas and coal, Bloomberg reported. The decision was made in consultation with European allies, who rely more heavily than the U.S. on Russian energy.
In another volatile day for global markets, contracts on the S&P 500 and Nasdaq 100 swung between gains and losses, signaling little respite for stocks whipsawed by the fallout from Russia’s invasion of Ukraine. The Stoxx Europe 600 index reversed an earlier gain of as much as 1% sparked by a Bloomberg report that the European Union is considering joint bond sales to counter the fallout from the war.
The 10-year Treasury yield jumped along with its German counterpart. Oil in New York pushed past $125 a barrel on fears of disarray in commodity flows stemming from the war in Ukraine and sanctions on Russia. Russia has threatened to cut natural gas supplies to Europe via the existing Nord Stream pipeline.
Rising energy prices are complicating the task for policy makers, who face a delicate balancing act in tightening to curb inflation without killing the economic recovery. Federal Reserve officials are set to meet on March 16 to review interest rates.
“We have a combination of soaring inflation and tightening financial conditions, and that is putting all of us in a bit of a bind, but it’s really putting the Fed into a bind,” said Kathy Jones, chief fixed-income strategist at Charles Schwab, on Bloomberg Surveillance. “I think the risk is more tightening than expected rather than less.”
Market expectations for a 25-basis-point rate hike next week and as many as six more this year would be “a big hill to climb right now given the tightening of financial conditions” she said.
While new round of EU stimulus would come as welcome relief for riskier assets including stocks, details of the bond plan remain sketchy, keeping investors on edge and volatility elevated.
“Today’s reaction is perhaps short-term; we need something more solid,” said Jane Foley, head of FX strategy at Rabobank, on Bloomberg television. “The reality is that Europe’s energy security has a massive question mark and there’s a fog, therefore, over the economic outlook for the euro zone.”
The bond-sale proposal may be presented as soon as next week, according to officials familiar with the preparations. The extraordinary move comes just a year after the EU launched a 1.8 trillion-euro ($2 trillion) emergency package backed by joint debt to finance member states’ efforts to deal with the pandemic. Now, the bloc faces massive financing needs as it begins to reform its military and energy infrastructure.
Meanwhile, the London Metal Exchange suspended trading in nickel after a short squeeze that drove prices as much as 111% higher. Russia’s MMC Norilsk Nickel PJSC is the largest producer of the metal, used to make stainless steel and car batteries.
JPMorgan Chase & Co. said it will remove Russian bonds from all of its widely-tracked indexes, further isolating the nation’s assets from global investors. The ruble was little changed in offshore markets, while Russia’s local markets remain closed until at least Wednesday.
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Here are some key events this week:
- Apple new product event, Tuesday
- EIA crude oil inventory report, Wednesday
- China aggregate financing, PPI, CPI, money supply, new yuan loans, Wednesday
- Reserve Bank of Australia Governor Philip Lowe speaks, Wednesday and Friday
- European Central Bank President Christine Lagarde briefing after policy meeting, Thursday
- U.S. CPI, initial jobless claims, Thursday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 were little changed as of 8:44 a.m. New York time
- Futures on the Nasdaq 100 fell 0.3%
- Futures on the Dow Jones Industrial Average were little changed
- The Stoxx Europe 600 fell 0.2%
- The MSCI World index fell 0.3%
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro rose 0.4% to $1.0894
- The British pound was little changed at $1.3093
- The Japanese yen fell 0.4% to 115.76 per dollar
Bonds
- The yield on 10-year Treasuries advanced six basis points to 1.84%
- Germany’s 10-year yield advanced 12 basis points to 0.11%
- Britain’s 10-year yield advanced seven basis points to 1.38%
Commodities
- West Texas Intermediate crude rose 5.3% to $125.70 a barrel
- Gold futures rose 1.3% to $2,021.50 an ounce
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