As Russian missiles hit a major Ukrainian base near the border with Poland on Sunday, the two sides gave their most optimistic assessment yet of the prospects for talks.
The lone chance of peace saw S&P 500 stock futures gain 0.7%, while Nasdaq futures rose 0.6%.
The Japanese Nikkei rose 1.1%, while MSCI’s broadest index of stocks in the Asia-Pacific region outside Japan rose 0.1% after slipping almost 4% last week.
Bonds remained under pressure after taking a beating last week as soaring commodity prices looked set to boost inflation further. Yields on 10-year Treasury notes rose three basis points early Monday to 2.03%.
Notably, a key measure of US inflation expectations climbed 3% and near record highs.
This only cemented expectations that the Federal Reserve will raise rates by 25 basis points at its general policy meeting this week and indicates that further action will be taken through the forecasts of members of the Federal Reserve. .
“Points will likely be mostly clustered around four or five hikes for 2022, down from three previously, given the stronger pace of inflation since the January FOMC meeting,” said Kevin Cummins, chief economist for the United States. States at NatWest Markets.
“We suspect we may also get an addendum on how the Fed plans to reduce the size of its balance sheet as early as this week.”
The Bank of England is expected to raise rates to 0.75% on Thursday, the third straight hike, and signal more, with the market pricing in an aggressive 2% rate by the end of the year.
Federal funds futures are implying no less than six or seven rises this year to around 1.75%, keeping the US dollar supported near its highest level since May 2020.
The euro was holding $1.0927, not far from its recent 22-month low of $1.0804, while the dollar hit a new five-year high against the yen at 117.55.
“The yen has been unable to display its typical safe-haven attributes, in part due to the sharp rise in US yields and the BoJ’s yield curve control policy which prevents JGBs from tracking rising global core yields,” said Rodrigo Catril, senior FX strategist at NAB.
“Japan is also a major energy importer, adding to concerns about a terms-of-trade shock from rising energy prices.”
Gold lost some of its safe-haven charm on Monday, falling 0.6% to $1,972 an ounce and moving away from last week’s high of $2,069. [GOL/]
Similarly, the chances of progress on Ukraine have seen oil prices give up some of their recent gains, although talks with producer Iran appear to have stalled. [O/R]
Brent was last traded $1.69 lower at $110.98, while US crude was down $2.11 at $107.22.