U.S. stock futures and European indexes rallied, following days of losses, while energy prices slumped and bonds sold-off, after reports that Russia was pulling back some troops from the Ukrainian border.
Futures tied to the S&P 500 rose 1.3% Tuesday, putting the broad index on course to halt three days of losses after the opening bell. Blue-chip Dow Jones Industrial Average Futures gained 1%, while technology-heavy Nasdaq-100 futures rose 1.8%.
Yields on benchmark U.S. 10-year Treasury notes rallied to 2.035% from 1.995% Monday. Bond yields and prices move in opposite directions.
The threat of war between Ukraine and Russia has, in recent days, added a geopolitical element to investors’ already troubled outlook. Warnings from the U.S. and its allies about the likelihood of a Russian invasion have grown louder, spooking investors concerned about the economic hit from such a conflict or the resulting sanctions on Russia’s economy.
Those fears abated somewhat Tuesday, after Russia’s Defense Ministry said some troops on the Ukrainian border were returning to their bases after completing training, according to Russian media.
“The market is believing what it is hearing in the headlines, but you do have to be careful with these things,” said Hani Redha, a multiasset fund manager at PineBridge Investments. “We have to be cautious on news like this in the so-called fog of war.”
Oil prices dropped from the eight-year high they hit Monday. Brent crude, the international oil benchmark, fell 2.5% to $94.11 a barrel. Benchmark European natural-gas prices also fell over 5%.
Overseas, European indexes rallied after Monday’s sharp losses. The pan-continental Stoxx Europe 600 rose 1%. In Asia, stock markets were mostly lower, with both Japan’s Nikkei 225 and Hong Kong’s Hang Seng Index down 0.8%. In mainland China, the Shanghai Composite Index rose 0.5%.
Russia has been accelerating a troop buildup along Ukraine’s border, in recent days. Russian lawmakers Tuesday will consider proposals to formally urge President Vladimir Putin to recognize the separatist-controlled regions of eastern Ukraine as independent states, a move that could justify an incursion into its neighbor. Russia has denied it plans to attack.
Russia is among the world’s largest suppliers of oil, as well as the biggest exporter of wheat and a major producer of key metals, such as palladium, aluminum and nickel, while Ukraine is a key transit route for Europe’s natural gas supplies.
“The biggest impact this thing has had has been in commodities and the feed through of that into inflation,” said Mr. Redha. A conflict which pushes energy prices and inflation higher could push central banks to raise interest rates faster than planned, he added.
The U.S. Producer Price Index, which covers prices that suppliers charge businesses, is due at 8:30 a.m. ET, and could offer investors’ further insight into inflation. Last month’s figures showed price rises cooling, a sign that supply-chain bottlenecks may be easing.
Earnings season continues, with quarterly results due from companies including Marriott International ahead of the opening bell.Airbnb will post earnings after markets close.