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Stock index futures point to a higher open with risk appetite coming back amid talk of peak sanctions.
Nasdaq 100 futures (NDX:IND) +2% are doing the best with all the megacap stocks above 2% in premarket trading. S&P (SPX) +1.5% and Dow (INDU) +1.4% futures are also higher.
Rates continue to climb, with the 10-year Treasury yield up 3 basis points to 1.9% and the 2-year up 2 basis points to 1.65%, back to levels of late 2019.
“The fascinating running theme is how quickly the world is moving towards alienating Russia,” Deutsche Bank’s Jim Reid wrote. “10 days ago when the west imposed the huge sanctions, it felt like they’d moved towards the maximum end of what people expected. However now it feels like European public opinion is building towards completely cutting off the Russian energy supply.”
“There are still big differences of opinion here amongst countries so this won’t be easy but pressure is building. Don’t be surprised if Russia moves first though if the direction of travel looks inevitable.”
Oil prices are lower, with WTI below $120 per barrel.
“There is a big difference between the current shock and prior shocks,” Standard Chartered strategist Steve Englander said. “The COVID and 2008-09 shocks led to lower demand, commodity prices, inflation and interest rates, at least initially. The current shock acts directly to raise commodity prices and inflation.”
“Central banks are more likely to raise than cut rates; this benefits commodity exporters and is a disadvantage to low-yielding, commodity-importing safe havens,” he added. “High-beta commodity exporters could still be vulnerable if higher commodity prices led to broad risk-off sentiment and slower global growth or if central banks were to tighten sharply in response to inflation risks. However, this is not our short-term base-case view.”
On the economic front, the January JOLTS report arrives shortly after the start of trading.
And crypto is rallying, with bitcoin up 8% after the inadvertent release of a coming executive order.