Stocks ease as Ukraine attacks and rate outlook trigger flight to havens

  • MSCI World Index drops for a fourth day
  • Russian shelling across Ukraine stirs up nervousness
  • Markets Brace for High Core CPI in US Earnings Season

LONDON, Oct 10 (Reuters) – Global stocks fell on Monday after Russian missiles pounded towns across Ukraine and renewed concern over the economic outlook pushed investors into safe-haven assets such as the dollar and bonds.

Any belief that the Federal Reserve will take a looser stance on monetary policy was extinguished on Friday by data showing U.S. unemployment fell in September, indicating a still-tight labor market.

The dollar held steady against a basket of currencies, while a number of market-based measures of investor risk nervousness showed a further increase.

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Russian missiles have killed civilians and knocked out power and heat in towns across Ukraine in apparent revenge strikes after President Vladimir Putin said an explosion on the Russian bridge to Crimea was a terrorist attack. read more read more

“I had wondered if the markets were looking at the situation in Ukraine and thinking it was bringing us to an end – which was the first reaction to the progress the Ukrainian military had made this summer. That reaction is no longer happening and that is clearly seen as just an increase in tension, rather than the end of anything,” said Kit Juckes, head of currency strategy at Societe Generale.

“We have geopolitical tensions and we are still on track to tighten monetary policy in the United States and the concern is always by the time they have finished tightening, will they have tightened too much and leave the economy vulnerable enough?” Juckes added.

The MSCI All-World Index (.MIWD00000PUS) was last down 0.4%, down for the fourth straight day. The pan-European STOXX 600 (.STOXX) fell 0.2%, after hitting one-week lows, while the FTSE 100 (.FTSE) fell 0.4%.

Futures on the S&P 500 fell 0.3%, while those on the Nasdaq lost 0.4%.

Wall Street sank on Friday after the upbeat payrolls report cemented expectations of another big rate hike. Read more

Futures imply an over 80% chance of rates rising 75 basis points next month, while the European Central Bank (ECB) is expected to match that and the Bank of England rise by at least 100 basis points. base. ,


US consumer inflation is expected to have moderated to an annual rate of 8.1%, but the core measure is expected to have accelerated to 6.5% from 6.3%. US CPI data is due Thursday.

“Whether one number should be the basis for huge swings in the markets, it seems inevitable that a notable failure on the core on either side could lead to big trading moves over the next few weeks, so expect that,” said Deutsche Bank strategist Jim Reid.

Minutes from the Fed’s latest monetary policy meeting will also be released this week and could help guide rate setters’ thinking on the likely path of monetary policy.


Although US inflation and the Fed’s response remain the focus of investors’ concerns, Eurozone government bonds benefited from the resumption of investor risk aversion.

Yields on the 10-year German Bund, which serves as a benchmark for the region, remained stable around 2.195%, while the more sensitive 2-year Schatz fell 7 basis points to 1.795%.

Adding another note of caution was a 2% drop in blue-chip Chinese stocks (.CSI300) following a survey that showed the first contraction in services activity in four months. Read more

Corporate earnings also kick off on Friday, with JPMorgan, Citi, Wells Fargo and Morgan Stanley reporting results.

The dollar index rose 0.2% to 113.06, leaving the euro down 0.3% at $0.9707 and the yen stable at 145.465, a hair’s breadth from the recent 24-year high of 145.90 which prompted the Japanese intervention.

The pound fell 0.2% to $1.1066, after the Bank of England announced a surprise move to shore up the gilt market ahead of the end of an emergency bond buying program Friday and that the government brought forward the release of an independent budget forecast. [nL8N31B0VI] Read more

Oil fell for the first time in a week as investors took advantage of last week’s 11% rally after an agreement on supply cuts by OPEC+.

Brent fell 0.6% to $97.30 a barrel, while U.S. crude fell 0.5% to $92.14 a barrel.

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Additional reporting by Wayne Cole; Editing by Diane Craft, Ana Nicolaci da Costa, Ed Osmond and Andrew Heavens

Our standards: The Thomson Reuters Trust Principles.


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