(Bloomberg) — Stocks are set to fall Monday on geopolitical risks and growing calls from Federal Reserve officials for higher interest rates to fight inflation.
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Futures for Japan, Australia and Hong Kong were lower after Wall Street shares slid Friday amid risk aversion. U.S. markets are shut for a holiday Monday.
The threat of Russian military action against Ukraine has boosted havens like sovereign bonds, though demand for shorter-maturity Treasuries will be tested Tuesday by a flood of supply. Australian bond yields fell, while the dollar was mixed in early trading.
Questions are swirling about what might happen to supplies of energy, grain and some metals if the Ukraine situation deteriorates. Oil is being buffeted by those concerns as well as the potential for a return of Iranian barrels.
In cryptocurrencies, Bitcoin retreated over the weekend and was trading near $38,000, adding to evidence of investor caution.
The U.S. has told allies that a Russian invasion of Ukraine would potentially see it target multiple cities beyond the capital Kyiv. President Joe Biden said on Friday he’s convinced Russian counterpart Vladimir Putin has decided to move against Ukraine. Moscow continues to deny it plans to invade.
The standoff between the West and Russia over Ukraine, along with the worry that tightening Fed monetary policy could choke growth in the world’s biggest economy, point to more swings in markets in an already volatile year.
Clients “are clearly concerned about tensions in Ukraine, which seem to be escalating, in addition to the concerns that we’ve been talking about for months like inflation and interest rates and slowing economic growth,” JoAnne Feeney, partner at Advisors Capital Management, said on Bloomberg Television.
Two top Federal Reserve officials at the end of last week backed raising rates in March to curb the hottest inflation in 40 years. They also supported starting balance-sheet reduction in coming months. JPMorgan Chase & Co. said the Fed is likely to raise rates by 25 basis points at nine consecutive meetings.
The Fed’s key inflation metric may have accelerated to a fresh four-decade high in January, data this week is expected to show.
China’s stocks will be closely watched amid fresh attempts by the government to crack down on the private sector and more default warnings from developers. A gauge of Chinese stocks traded in the U.S. tumbled Friday.
Bloomberg Economics expects China’s banks to keep loan prime rates steady after a cut in January.
Here are some events to watch this week:
Russia’s Foreign Minister Sergei Lavrov has agreed to meet U.S. Secretary of State Antony Blinken this week in Europe
Fed Governor Michelle Bowman speaks Monday
China property prices, loan prime rates Monday
New Zealand rate decision Wednesday
BOE Governor Andrew Bailey appears before the Treasury Committee Wednesday
Bank of Korea policy decision Thursday
EIA crude oil inventory report Thursday
Fed officials Loretta Mester and Raphael Bostic speak Thursday
U.S. new home sales, GDP, initial jobless claims Thursday
U.S. consumer income, U.S. durable goods, PCE deflator, University of Michigan consumer sentiment Friday
Some of the main moves in markets:
The S&P 500 fell 0.7% Friday
The Nasdaq 100 fell 1.1% Friday
Nikkei 225 futures fell 0.9% earlier
Australia’s S&P/ASX 200 Index futures fell 0.7%
Hang Seng Index futures lost 0.8% earlier
The Japanese yen was at 114.94 per dollar
The offshore yuan traded at 6.3248 per dollar
The Bloomberg Dollar Spot Index rose 0.2% Friday
The euro was at $1.1317
The yield on 10-year Treasuries declined three basis points to 1.93%
Australia’s 10-year yield fell six basis points to 2.19%
West Texas Intermediate crude was at $91.07 a barrel
Gold was at $1,898.43 an ounce
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