Biden Mistake, Bond Sale, Shanghai Shutdown


©Reuters

By Geoffrey Smith

Investing.com — The Kremlin is digging in after President Joe Biden’s blunder calling for the impeachment of Vladimir Putin. Bonds continue to sell off as the yield curve points to slower growth. Tesla (NASDAQ:) is seeking a stock split, while Apple (NASDAQ:) is considering cutting production of some products due to weakening demand. closes at a new high for the year and oil falls as Shanghai goes into lockdown (in stages) for a week. Here’s what you need to know in the financial markets on Monday, March 28.

1. The Kremlin digs in after Biden’s comments; Zelensky talks about peace conditions

Hopes for a quick peace in Ukraine suffered a severe blow over the weekend after US President Joe Biden or Russia’s Vladimir Putin left power. While his comments at the end of a speech in Poland in which he pledged support for Ukraine’s independence were unscripted, they were clearly intentional.

The comments are likely to reinforce suspicions, both in Russia and elsewhere, of a secret US agenda to seek regime change, although the State Department and the White House later stated that this is not the case. case.

Separately, Ukrainian President Volodymyr Zelensky told independent Russian journalists that he would be willing to accept permanent neutrality as a basis for peace, provided it was guaranteed by third parties. He also said that he would be willing to have separate negotiations on the status of eastern Ukraine and Crimea, removing an additional obstacle to peace talks. On such suggestions, a Kremlin spokesman said a meeting between the two presidents would be “counterproductive”, although he noted that the diplomats would resume their meetings in Istanbul on Tuesday.

2. Bond sales continue, further flattening the curve

Two-year US bond yields hit their highest level in nearly three years overnight as the Federal Reserve’s policy repricing continued in response to runaway inflation.

The Treasury yield touched 2.41% before falling to 2.37% at 6am ET (10:00 GMT), still up 7 basis points on the day. however, yields were largely flat, rising just 1 basis point to 2.50%. As such, 2- to 10-year yields have dipped to just 13 basis points, the lowest since the start of the pandemic. Flatter and/or inverted yield curves often indicate a slowdown in future growth. However, its usefulness as a predictor of recessions is often questioned.

Analysts have been desperate to revise their expectations for Fed rate hikes after a series of comments last week from Chairman Jerome Powell and others warning of the possible need for half-point hikes rather than quarter-point hikes. of points suggested above.

3. Actions prepared for mixed opening; Apple and Tesla news in the spotlight

US stock markets are poised to open mixed later, with concerns about the rapid sell-off of bonds, which will increase the costs of capital for the broader economy, finally starting to weigh on equity markets that had defied the severity during last week’s loss.

At 6:20 am ET, , and were largely unchanged, after two straight weeks of solid gains.

Heavyweights are likely to dominate proceedings ahead, with Apple shares falling 1.8% on a report that it will do so in response to weakening consumer demand, while Tesla shares rose. 5% after the electric-vehicle maker said it wants, which could make the stock more attractive to small investors.

Elsewhere, data for February is due at 8:30 am ET.

4. Bitcoin near 2022 high as BoJ allows yen to weaken

closed at a new high for 2022 as it revived one of the classic arguments for having crypto instead of fiat currencies. At 6:20 it was at $47,204, up 6% on the day.

The BoJ weighed in heavily on Japanese bond markets overnight, saying it would buy unlimited amounts of bonds over the next four days to keep long-term yields at its target policy rate. As such, the BoJ reinforced suspicions that it prefers to devalue the yen rather than contain inflation.

The hit a six-year low of 125.08 against the dollar as a result of the intervention. The BoJ action supports a series of comments in the past week by BoJ officials who have visibly relaxed on the yen’s decline in currency markets.

5. Oil falls in Shanghai lockdown

Crude prices fell sharply on fears over the trajectory of Chinese demand, as the city of Shanghai will carry out massive tests for Covid-19 over the next week that will affect 25 million people.

As of 6:30 a.m. ET, futures were down 4.2% at $109.11 a barrel, while the global benchmark was down 3.7% at around $113.03 a barrel.

The measures will not close the city’s port, nor many of its factories (although the Tesla factory in Shanghai is among those that will remain closed for now). However, the measures, which will be staggered in the city, will ban private car traffic where they are in place.

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