US futures fall ahead of Fed as oil prices fall

  • U.S. futures fell on Tuesday as investors weighed the Russia-Ukraine conflict and Federal Reserve policy.
  • Oil also fell, continuing its recent decline as coronavirus cases in China clouded demand prospects.
  • The Fed is expected to raise interest rates on Wednesday as the conflict in Ukraine has little impact on the central bank.

U.S. futures fell on Tuesday as the Russia-Ukraine conflict clouded the global outlook and investors braced for the

Federal Reserve

start raising interest rates, while oil prices continued to fall.

S&P 500 futures were down 0.33% at 6:16 a.m. ET, after the benchmark stock index fell 0.74% on Monday.

Nasdaq 100 futures were down 0.19%, after the index closed in a so-called

bear market

– a decline of 20% or more from recent highs – the day before. Dow Jones futures were down 0.38%.

European stocks fell as investors weighed the risks of war in Ukraine for the region’s economy. The continent-wide Stoxx 600 index was down 1.49% in early trading.

In China, concerns about rising coronavirus cases in China and potential US sanctions sent stocks tumbling. The country’s CSI 300 index fell 4.57% overnight, down nearly 20% this year. However, Tokyo’s Nikkei 225 gained 0.15%.

The decline in stocks came as oil fell for the second day, reflecting investor concern over the potential impact on global energy demand, although lower prices would also in theory ease some inflationary pressures. .

Brent crude fell 5.8% to $100.78 a barrel, while WTI crude fell 5.88% to $96.98 a barrel. The falls came as talks between Russia and Ukraine continued and rising COVID cases in China caused investors to lower their expectations for future demand.

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However, investors found little comfort in falling oil prices. A host of factors, including central bank policy and China’s biggest COVID outbreak since the pandemic began, are worrying traders, analysts said.

“Markets were again unable to sustain gains as the cocktail of concerns widened with China being added to the list,” said Richard Hunter, head of markets at trading platform Interactive Investor.

The Federal Reserve’s Open Markets Committee (FOMC) is set to announce its latest interest rate decision on Wednesday, with most analysts expecting the main rate to rise 25 basis points from its current record high. between zero and 0.25%.

Strategists will take a close look at the so-called dot chart, which lays out Fed officials’ expectations for the future course of interest rates.

“We expect the midpoints to show 5 ups in 2022 (3 previously), 4 ups in 2023 (3 previously), and 1 up in 2024 (2 previously),” Bank of America analysts said in a note. to customers on Monday, updating its predictions.

“Communication from the Fed has pivoted belligerently in the new year, with recognition that the Fed needs to take inflation seriously and normalize policy quickly,” they said.

Bond yields have soared over the past week, after falling sharply when Russia invaded Ukraine in February, as investors raised expectations for Fed hikes in 2022.

The yield on the main 10-year US Treasury note fell 3.5 basis points on Tuesday to 2.109%, but still hovered around its highest level since mid-2019. Bond yields move inversely to prices .

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