Wall Street and Euro futures rise on Biden-Putin summit hopes

LONDON (Reuters) – US stock index futures rose, the euro rose and global stocks settled on Monday as a glimmer of hope emerged for a diplomatic solution to the crisis between Russia and Ukraine.

US President Joe Biden and Russian President Vladimir Putin have agreed in principle to hold a summit on the Ukraine crisis. Read more

The Kremlin said there were no concrete plans to hold a summit, but a call or meeting could take place at any time.

The summit will only take place if Russia does not invade Ukraine first, which Western countries have said they could do at any moment despite repeated denials. Russia has continued military exercises in Belarus due to end on Sunday, and Western countries say they have continued to build up their forces on the Ukrainian border. Read more

“Markets are taking President Putin at his word that he does not want a large-scale escalation, volatility is high but still contained,” said Giles Coghlan, chief currency strategist at HYCM.

And in a reminder of the risks, Reuters reported that Biden has prepared a package of sanctions that include preventing US financial institutions from processing transactions for major Russian banks. Read more

S&P 500 stock futures rose 0.5%. Nasdaq futures gained 0.3%, after falling more than 1%. US markets are on holiday on Monday, but futures contracts are still trading.

MSCI World Stock Index (.MIWD00000PUS) It was little changed above the two-and-a-half week lows hit on Friday.

European stocks (.stoxx) UK stocks rose 0.34% (.FTSE) It rose 0.4%.

MSCI’s broadest index of Asia Pacific shares outside Japan (MIAPJ0000PUS.) Trimmed previous losses to fall 0.3%, while Japan’s Nikkei (.N225) It halved its decline, declining by 0.8%.

The euro rose 0.3% to $1.1355, while the US dollar index fell 0.27% to 95.866, well below a year-and-a-half high of 97.441 hit last month.

The dollar fell to 114.91 against the yen.

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Also troubling markets was the possibility of severe tightening from the US Federal Reserve as inflation spreads. The Fed’s preferred measure of core inflation is due out later this week and is expected to show an annual rise of 5.1% – the fastest pace since the early 1980s.

“The January inflation readings came as a surprise materially to the upside,” said Bruce Kasman, chief economist at JP Morgan.

“We are now looking to raise the Fed by 25 basis points (bps) at each of the next nine meetings, with the interest rate approaching a neutral position by early next year.”

At least six Fed officials are scheduled to speak this week and markets will be highly sensitive to their views on a possible 50 basis point hike in March.

The latest comment ran counter to this drastic move, and futures reduced the chance of a half-point rise to about 20% from well above 50% last week.

This helped short-term Treasuries pare a few of their losses last week, while the bullish curve was fully flattened as safe haven buying pushed 10-year yields down to 1.9268%.

10 year German government bonds

The economic recovery in the euro zone rebounded sharply this month as the easing of coronavirus restrictions gave a boost to the bloc’s dominant services sector, according to IHS Markit’s composite PMI.

In the oil markets, Brent crude rose 28 cents to $93.80, while US crude rose 23 cents to $91.30.

Oil suffered its first weekly loss in two months last week, pulling it out of its highest levels in seven years, amid tentative signs of progress in the Iran deal that may launch new supplies in the market.

However, the agreement remains elusive, offset by the risk of sanctions against oil-producing Russia in the event of an invasion of Ukraine.

On Sunday, ministers from Arab oil-producing countries rejected calls to pump more and said OPEC+ – an alliance of OPEC nations and other suppliers including Russia – should stick to its current deal to add 400,000 barrels of oil per day.

Gold benefited from its status as one of the oldest safe harbors, as it climbed to a nine-month high of $1,908 an ounce, before retreating to $1,896 an ounce.

Editing by Kenneth Maxwell, Lincoln Fest, Peter Graf

Our criteria: Thomson Reuters Trust Principles.