S&P 500 Futures, US Treasury yields portray risk-on mood as Russia-Ukraine peace talks progress
|- Positive assessments on peace talks from Russia, Ukraine brighten market’s mood.
- US-China talks, IMF’s Georgieva also adds to the risk-on sentiment.
- S&P 500 Futures snap two-day downtrend, US 5-year Treasury yields refresh 34-month high.
- Headlines from Russia, Pentagon join pre-Fed caution to challenge the bulls.
Having witnessed multiple days of pessimism, global markets witnessed a positive start to the key week amid positive developments concerning the Ukraine-Russia talks.
While portraying the mood, the S&P 500 Futures rise 0.65% to 4,228 to print the first positive daily performance in three. On the same line were the US Treasury yields as the 10-year coupon rose 3.3 basis points (bps) to 2.04% whereas the 5-year yields rose beyond 2.0% to the highest since May 2019.
Headlines confirming brighter assessment of the Moscow-Kyiv talks joined the US-China diplomats’ meeting in Italy to offer an upbeat start to the week comprising monetary policy meeting of the US Federal Reserve (Fed). Also positive for the market sentiment were comments from International Monetary Fund Managing (IMF) Director Kristalina Georgieva who said during the CBS's "Face the Nation" program that Russia may default on its debts in the wake of unprecedented sanctions over its invasion of Ukraine, but that would not trigger a global financial crisis, per Reuters.
Alternatively, the Wall Street Journal (WSJ) mentioned a person familiar with the matter while saying, “Russian prosecutors have issued warnings to Western companies in Russia, threatening to arrest corporate leaders there who criticize the government or to seize assets of companies that withdraw from the country.” The comments were joined by the news from Sputnik quoting Russian FM saying, “Moscow will not ask western sanctions to be lifted, pressure will not change its course.” Additionally, Pentagon's press secretary John Kirby was also quoted by ABC News as suggesting Russian forces are "broadening their target sets" after rockets hit a Ukrainian military base near the Polish border overnight.
It’s worth noting that the record-high US inflation expectations, per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, adds strength to the US Treasury yields as market players await this week’s key Fed minutes.
Amid these plays, prices of gold and WTI crude oil remain on the back foot whereas the US Dollar Index (DXY) prints mild losses around a 22-month high.
Looking forward, a light calendar and cautious sentiment ahead of the Fed may restrict market moves but updates over the Russia-Ukraine stand-off will entertain traders.
Read: The week ahead: Fed and BoE rate decisions, UK wages, Cineworld and Deliveroo
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