The Fed is expected to raise rates for the first time since 2018 in an effort to curb the hottest inflation in 40 years.
Stocks rallied after reports that talks among Russia and Ukraine are progressing. Treasuries and the dollar retreated before the Federal Reserve policy decision.
The S&P 500 climbed after the Financial Times reported that Ukraine and Russia have made significant progress on a neutrality plan to end the war, citing three people involved in the talks. The Nasdaq Golden Dragon China Index of giants like Alibaba Group Holding Ltd. and Baidu Inc. surged more than 20% after the Asian nation promised to ease a regulatory crackdown, support property and tech companies and stimulate the economy. Treasury two-year yields traded above 1.85%, while the 30-year rate rose toward the highest since mid-2019. West Texas Intermediate crude erased gains.
A proposal for Ukraine to become a neutral country but retain its own armed forces “could be viewed as a certain kind of compromise,” Kremlin spokesman Dmitry Peskov said Wednesday, hinting at possible progress in peace negotiations. Ukrainian President Volodymyr Zelenskiy delivered an emotional address to the US Congress, appealing for help from Americans to fend off the Russian invasion.
Growth in US retail sales slowed in February after surging a month earlier, while homebuilder sentiment fell in March to a six-month low. The figures come ahead of a Fed rate decision later Wednesday, with policy makers expected to raise rates for the first time since 2018 in an effort to curb the hottest inflation in 40 years. At the same time, officials need to be cognizant of the impact of tighter monetary policy on economic growth.
“Our view remains that simply selling risk assets is not the best response to the war in Ukraine. Instead, we favor strategies that provide downside protection while focusing on long-term returns. Higher portfolio volatility makes diversification across regions, sectors, and asset classes more important, ”wrote Mark Haefele, chief investment officer at UBS Global Wealth Management.
“Risk assets are being bolstered by positive news flow from Russia and Ukraine, and reports China will step in to support equities and the economy. If positive news continues there will be some normalization of risk premiums in oil, bond, and equity volatility, ”wrote Dennis DeBusschere, founder of 22V Research.
“At this juncture, we remain skeptical of countertrend rallies and recommend investors wait for more evidence to confirm a bottom has been set,” wrote Craig W. Johnson, chief market technician at Piper Sandler.
Here are some key events to watch this week:
- Bank of England rate decision, Thursday
- ECB President Christine Lagarde, Executive Board member Isabel Schnabel, Governing Council member Ignazio Visco and Chief Economist Philip Lane speak at a conference, Thursday
- Bank of Japan rate decision, FridayPlay Video
Some of the main moves in markets:
- The S&P 500 rose 1.8% as of 10:30 am New York time
- The Nasdaq 100 rose 2.8%
- The Dow Jones Industrial Average rose 1.3%
- The Stoxx Europe 600 rose 3.1%
- The MSCI World index rose 2.6%
- The Bloomberg Dollar Spot Index fell 0.5%
- The euro rose 0.6% to $ 1.1027
- The British pound rose 0.5% to $ 1.3109
- The Japanese yen was little changed at 118.32 per dollar
- The yield on 10-year Treasuries advanced three base points to 2.17%
- Germany’s 10-year yield advanced six base points to 0.39%
- Britain’s 10-year yield advanced six base points to 1.63%
- West Texas Intermediate crude fell 1.1% to $ 95.41 a barrel
- Gold futures fell 1.1% to $ 1,908.90 an ounce
–With assistance from Emily Barrett, Sunil Jagtiani, Robert Brand, Vildana Hajric and Emily Graffeo.