Share futures jump, gold slips on hopes for diplomacy in Ukraine

A man looks at stock market monitors in Taipei October 8, 2008. REUTERS/Nicky Loh (TAIWAN)/File Photo

SINGAPORE, Feb 18 (Reuters) – U.S. and European stock futures bounced back on Friday and selling pressure on Asian shares eased after the U.S. Secretary of State agreed to a meeting with Russia’s foreign minister, raising hopes of a solution to the standoff over Ukraine.

S&P 500 futures jumped 0.7% and Nasdaq futures gained 0.8% following the news, while, in early trading, pan-region Euro Stoxx 50 futures were up 0.45%, and FTSE futures were 0.4% higher.

The positive sentiment ranged across asset classes. Safe-haven currencies such as the Japanese yen and Swiss franc retreated a little in Asia trade having climbed to two-week highs on the dollar overnight, and gold lost 0.4%.

U.S. Secretary of State Antony Blinken has accepted an invitation to meet with Russian Foreign Minister Sergei Lavrov late next week provided Russia does not invade Ukraine, the U.S. State Department said.

“It’s better news than what we had yesterday,” said Kyle Rodda, an analyst at IG Markets in Melbourne. “But we’ve seen diplomatic talks go nowhere before, and the troops are still on the border, so risks remain.”

There was slightly less positivity when it came to Asian shares. MSCI’s broadest index of Asia shares outside Japan (.MIAPJ0000PUS) was last down 0.24%, but markets in Tokyo (.N225), Hong Kong (.HSI), Sydney (.AXJO) and Seoul (.KS11) all pared deeper morning losses.

Wall Street had taken a dive overnight, with the S&P 500 (.SPX) dropping 2.1% and the Nasdaq (.IXIC) off 2.9% – while gold shot to an eight-month peak – on renewed U.S. warnings of an imminent Russian invasion. read more

Investors fear a wider war as one of the deepest crises in post-Cold War relations plays out, with Russia wanting security guarantees, including Ukraine’s never joining NATO.

Treasuries likewise gave back some overnight gains, with the benchmark 10-year yield last up two basis points to 1.9877%. Two-year yields also rose two basis points to 1.4902%.

Oil dipped and Brent crude futures were last down 0.6% on Friday at $92.44 a barrel, more than 4% below Monday’s peak, and U.S. crude fell 0.7% to $91.07 a barrel.

RATES RACE

Concern about conflict in Ukraine comes with markets already rattled by a rates outlook that could hold as many as seven Federal Reserve increases in the year ahead.

St. Louis Fed president James Bullard on Thursday reiterated his call for the Fed funds rate to be raised to 1% by July to combat stubbornly high inflation and Fed funds futures price about a 1/3 chance of a 50 bps hike next month to begin. read more

Cleveland Fed President Loretta Mester said the pace of hikes will need to be faster than previous cycles. read more

“Markets have been particularly volatile recently and virtually everyone adjusted their Fed hike calls higher,” said NatWest Markets’ strategist Jan Nevruzi.

“The consensus seems to range between 5 (our view) and 7 (every meeting) hikes and I do believe the right number lays somewhere in between. Given the strong growth trend and elevated inflation, it wouldn’t be too surprising to see a hike at every meeting from now on,” Nevruzi said.

On Friday, Japan reported a fifth straight month of inflation, with energy prices posting their biggest annual rise in 41 years. read more

Elsewhere in currency markets the dollar held its bid and was firm at $1.1363 per euro though the Aussie gained a little in line with the risk-on mood to $0.7201 .

Editing by Lincoln Feast and Kenneth Maxwell

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