- U.S. futures and European stocks fell on Wednesday after Russian-Ukrainian peace talks and ahead of private payroll data from ADP in the United States.
- Skepticism over Russia’s intentions and the success of Tuesday’s peace talks drove stocks lower, while oil gained.
- Investors were eyeing private sector employment data for March, due later in the day.
U.S. equity futures and European stocks fell on Wednesday as investor skepticism grew over apparent progress in peace talks between Russia and Ukraine, which in turn pushed up the price of oil.
Russia said on Tuesday it would agree to reduce military action near the Ukrainian capital of kyiv and take steps to defuse the conflict. Stocks rallied on the news, while the price of oil fell just above $100 a barrel. But that was quickly met with skepticism from the West and Ukraine, which on Wednesday dampened risk appetite and weighed on markets like equities.
S&P 500 futures fell 0.43%, Dow Jones futures fell 0.36% and Nasdaq futures fell 0.57%, indicating a start lower trading later.
European equities, which have been more sensitive to events in the region, also fell. The pan-European Stoxx Europe 600 fell 0.88%, Britain’s FTSE 100 fell 0.11%, Germany’s DAX fell 1.47% and France’s CAC 40 lost 1.16%.
“As pleasant as the peace talks initially seem, there is skepticism about Russia’s true intentions,” Matt Simpson, senior market analyst at City Index, said. “They haven’t kept their word with the humanitarian corridors, and it’s possible that their promise to scale back their ‘military operations’ around Kyiv is just a ploy to disperse their troops elsewhere.”
Oil gained, driven by lingering fears that a protracted war in Ukraine could prompt the West to impose tough sanctions on Russian energy exports. The EU, which relies heavily on Russia for natural gas and crude oil, is still considering whether or not to implement some sort of ban. Russia produces about 10% of the world’s daily crude oil and exports about three-quarters of that total.
The price of oil is still heading for its biggest weekly decline since late November, but on Wednesday Brent crude rose nearly 2.00% to $109.78 a barrel, while WTI also gained 2% to to trade around $106.22.
The nearly 20% rise in the value of oil since Russia invaded Ukraine in late February has heightened concern among investors and central bankers about an energy price shock in a world economy where the inflation has already been high for decades.
Investors are expecting fairly aggressive interest rate hikes from the world’s major central banks, including the
, the Bank of England and the European Central Bank. As a result, bond yields jumped as investors dumped fixed income assets, which are underperforming in a rising rate environment.
US 10-year Treasuries are trading around their highest level in three years, after rising nearly 60 basis points in the past month alone. On Wednesday, the 10-year rate was up 1 basis point to 2.407%.
Investors are also awaiting the private sector payrolls release from payroll company ADP later on Wednesday. Economists expect to see an increase of 450,000 in March, which in theory could suggest Friday’s larger nonfarm payrolls report could also show healthy growth, although the two won’t move. not always together.
“The ADP March jobs report, also from the US, will be more interesting, despite its somewhat tenuous link to Friday’s official labor market data, and is expected to show around 450,000 jobs in the sector private have been added,” said Caxton FX strategist Michael Brown. noted.