US stocks fall as war worries return, oil rises: Markets end

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(Bloomberg) – U.S. stocks fell as hopes of de-escalation in the war in Ukraine faded and investors weighed the risks to economic growth from accelerating inflation. Oil rebounded after a two-day slump.

The S&P 500 fell in early trading on warnings that the gains of the past two weeks have the characteristics of a bearish rally. The Treasury curve steepened slightly after a brief inversion on Tuesday signaled the prospect of a recession. In Europe, bonds fell as traders bet higher inflation will force policymakers to end their era of negative rates sooner than expected.

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Talks with Ukraine have yielded no breakthroughs and much remains to be done before a deal is possible, Kremlin spokesman Dmitry Peskov said, pointing to difficulties facing efforts to achieve a ceasefire. The economic damage from the war in Ukraine is mounting across Europe as already record inflation soars further and Germany faces danger of recession due to its dependence on Russian energy.

“We’re skeptical of getting ahead here when it comes to hope,” Lisa Shalett, chief investment officer of Morgan Stanley Wealth Management, told Bloomberg TV. “While we respect the amount of cash available and the desire to ‘buy the dip’ after seeing a correction in the S&P 500 and a bear market in the Nasdaq, the reality is that the risk has really fundamentally increased whether it’s you talk about geopolitical risk,” or fundamentals. “We continue to warn people about the vulnerability of earnings here.”

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Ukraine update: Russia sees ‘no breakthrough’ in peace talks

Oil rallied above $108 a barrel in New York. The dollar slid, the euro climbed and the yen rebounded from a six-year low after the Bank of Japan pledged to buy more stocks than expected and include longer-term debt.

President Joe Biden is set to invoke Cold War powers to encourage domestic production of critical minerals for electric vehicles and other types of batteries, people familiar with the matter have said. Germany has triggered a contingency plan to prepare for a possible Russian gas cut as President Vladimir Putin insists crucial fuel must be paid for in roubles. Russia may expand the list of products for which it requires payment in rubles to include grain, oil, metals and others.

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Intercontinental Exchange Inc. is considering changing its European gas futures after prices hit record highs and prompted some companies to curb trading, according to people familiar with the matter.

The global equity rally remains fragile as the war in Ukraine drags on. The inverted Treasury yield curve is stoking debate about the risks of slowing growth as central banks globally begin to withdraw stimulus. US money markets are pricing in two more percentage points of interest rate hikes this year.

How scary is the inverted yield curve? This is the theme of this week’s MLIV survey. Please click here to participate.

Some key events to watch this week:

U.S. GDP, WednesdayRichmond Fed President Thomas Barkin to speak, WednesdayChinese industry, non-manufacturing PMIs, ThursdayOPEC and non-OPEC ministerial meeting to discuss output targets, ThursdayNew York Fed President , John Williams, will speak, ThursdayU.S. jobs report, friday

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Some of the major movements in the markets:

Shares

The S&P 500 fell 0.2% at 10:11 a.m. PT The Nasdaq 100 fell 0.4% The Dow Jones Industrial Average was little changed The Stoxx Europe 600 fell 0.5% MSCI World index changed little

Currencies

The Bloomberg Dollar Spot Index fell 0.5% The euro rose 0.6% to $1.1156 The British pound rose 0.6% to $1.3167 The Japanese yen rose 0, 8% to 121.94 per dollar

Obligations

The 10-year Treasury yield was little changed at 2.39% Germany’s 10-year yield advanced six basis points to 0.70% Britain’s 10-year yield advanced three basis points to 1.68%

Merchandise

West Texas Intermediate crude rose 3.8% to $108.22 a barrel Gold futures rose 1% to $1,937.70 an ounce

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