After the opening bell, S&P 500 futures jumped 1.4 percent, putting the broad index on track to end three days of losses. Futures on the blue-chip Dow Jones Industrial Average increased by 1.1 percent, while Nasdaq-100 futures increased by 2%.The yield on the benchmark 10-year Treasury note increased to 2.043% from 1.995 percent on Monday. Bond yields and prices are inversely proportional.
The prospect of conflict between Ukraine and Russia has given a geopolitical dimension to an already tumultuous market picture in recent days. The United States and its allies have increased their warnings about the possibility of a Russian invasion, alarmed investors worried about the economic impact of such a fight or the sanctions that would follow.
The Russian Defense Ministry said Tuesday that some troops near the Ukrainian border were returning to their posts after finishing training, while large-scale military operations continued elsewhere.
“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 2.8% to $93.80 a barrel. Benchmark European natural-gas prices slumped over 9%.
European stock indexes rallied after Monday’s sharp losses, with the pan-continental Stoxx Europe 600 up 1.3%. Russia’s RTS index jumped almost 5%. The Russian ruble rallied 1.3% against the dollar, while the Ukrainian hryvnia rose 1%.
In recent days, Russia has accelerated its force buildup around Ukraine’s border. Russian legislators will debate proposals on Tuesday that would formally push President Vladimir Putin to recognise the separatist-controlled districts of eastern Ukraine as separate republics, a step that may legitimise a military intervention in its neighbour. Russia has stated that it has no intentions to strike.
Russia is a significant oil provider, wheat exporter, and manufacturer of critical metals such as palladium, aluminium, and nickel, while Ukraine is a crucial transit route for Europe’s natural gas supply.
Mr. Redha stated, “The largest impact this item has had is in commodities and the feed through of that into inflation.” He noted that a war that drives up commodity prices and inflation might compel central banks to hike interest rates sooner than expected.
Some investors believe that a conflict’s international economic impact will be minimal. “The market will respond immediately and ask questions later in the short term,” said Brian O’Reilly, head of market strategy at Mediolanum International Funds. “However, anything short of a huge escalation of hostilities has little impact on the global economic picture.”
The U.S. Producer Price Index, which covers the prices that suppliers charge firms, is expected at 8:30 a.m. ET and might provide more insight into inflation for investors. Price increases slowed last month, indicating that supply-chain constraints may be resolving.
The earnings season is still going strong, with businesses like Airbnb reporting after the markets close. Marriott International’s stock jumped more than 3% in premarket trade after the company announced that its fourth-quarter sales had increased.
Tower Semiconductor, a Nasdaq-listed firm, jumped more than 45 percent in premarket trading after The Wall Street Journal claimed that Intel was close to buying the Israeli chipmaker for about $6 billion.
Stock markets in Asia were mainly closed before Russia announced its retreat, and they were usually down. Both the Nikkei 225 and the Hang Seng Index in Hong Kong plummeted by 0.8 percent. Mainland China’s Shanghai Composite Index climbed 0.5 percent .