S&P 500 Futures pare gains as risk-aversion returns on Ukraine, China covid risks

Risk-aversion is seeping back into the market after an upbeat start to the week early Monday, as the sentiment is taking a hit on fresh signs of worry on the Ukraine crisis.

Meanwhile, the covid resurgence in China and its lockdown in the Shenzhen city of 17.5 million people are adding to the souring market mood.

Toyota announced a suspension of production in China’s Changchun city due to COVID-19 shutdown measures. FoxCon halted output at its iPhone site in Shenzhen city.

Despite the upbeat assessment and some progress on talks between the Russian and Ukrainian officials over the weekend, markets are weighing in the weekend news of a deadly Russian attack on a Ukrainian military base near the Polish border.

Russia fired around 30 cruise missiles at the base, outside the city of Lviv, early Sunday, the local governor said. At least 35 people died in the strike on the Yavoriv training base.

Over the last hours, various Ukrainian media outlets reported that air raid sirens going off in (at least) 19 of 24 regions in Ukraine.

However, they continue to warn that Russian bomber aircraft is aloft for further missile strikes in the coming hours, leaving investors on the edge.

Market reaction

Risk-sensitive assets such as stocks, commodity currencies and the pound are feeling the pull of gravity, tumbling alongside fresh covid risks in China.

The S&P 500 futures are now adding 0.19% on the day vs. the previous gain of 0.64%. AUD/USD is losing the 0.7250 barrier, down 0.52% so far.

Chinese stocks are down 1.50% to 2% while the Nikkei 225 is defending gains, holding the lower ground below 26,000.