Stock futures gain after selloff sends indices to 2022 lows

U.S. stock futures rebounded on Tuesday, putting major indexes on track to end three days of punishing declines.

Futures linked to the S&P 500 rose 0.9%, a day after the broad index fell 3.2% to its lowest level of the year. Tech-heavy Nasdaq-100 futures rose 1.4% while contracts tied to the Dow Jones Industrial Average rose 0.7%.

A cocktail of geopolitical risks and economic headwinds poses the biggest threat to global growth in years and rattles markets. In the US, soaring inflation prompted the Federal Reserve to start raising interest rates and investors fear the move could tip the economy into recession.

Global markets appear equally troubled. In China, the resurgence of Covid-19 outbreaks and Beijing’s tough approach to combating them threatens to rekindle the supply chain bottlenecks that first drove up inflation. In Europe, the war in Ukraine threatens to keep energy prices high and is weighing on growth in the region.

“By 2023, you will most likely see growth slow down very significantly, and the specter of recessions is really starting to loom,” said Seema Shah, chief strategist at Principal Global Investors..

“What we’re seeing is the realization that it’s going to be very difficult for the Fed to get that soft landing the way it should. It’s not impossible, but it will be a very balancing act. difficult.

As markets rose on Tuesday, the gains were unlikely to alter the market’s downward trajectory, Ms Shah said. Investors were welcoming signs that the conflict in Ukraine was not escalating and that a planned EU embargo on Russian oil could face delays, she said.

The yield on the benchmark 10-year Treasury note fell slightly to 3.034% on Tuesday from 3.080% on Monday.

Brent crude oil fell 1.7% to $104.12 a barrel. Oil prices had risen in recent months, but fears that China’s lockdowns could sap demand for commodities slowed the rally.

Oil demand in China is expected to rebound strongly as restrictions begin to ease, although the European Union’s proposed ban on Russian oil imports remains an overhang, said Daniel Hynes, senior commodities strategist at ANZ. in Sydney.

“Fundamentals are still very much tilted towards an extremely tight market with risks certainly skewed towards further supply declines over the next three to six months,” Hynes said.

Bitcoin prices rose slightly after a massive sell-off. The world’s largest cryptocurrency traded at $31,376.99 on Tuesday, according to CoinDesk. That was up from 5 p.m. ET Monday, when it stood at $31,075.70.

Asian stock indices were mixed on Tuesday.


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Kin Cheung/Associated Press

Overseas, the pancontinental Stoxx Europe 600 index rose 1%. In Asia, Japan’s Nikkei 225 closed down 0.6%, the Shanghai Composite rose 1.1% and Hong Kong’s Hang Seng index fell 1.8%.

Swedish Match jumped more than 24% after confirming tobacco company Philip Morris International was in talks to buy it.

“I expect near-term market volatility to persist in Asia as markets grapple with ongoing supply chain challenges, the likelihood of higher inflation and the prospect of more restrictive policies from global central banks,” said Emerging Markets Researcher Matt Doody. analyst in the global research team of Janus Henderson Investors.

Janus Henderson’s emerging markets fund has shifted its portfolio away from longer-term growth stocks due to higher rate risks, Doody said. Duration is a measure of the price sensitivity of bonds or other financial investments to changes in interest rates, given the timing of expected future cash flows. Fast-growing tech stocks that are valued largely on the basis of distant earnings forecasts are longer-lived assets than stocks of mature companies.

Write to Dave Sebastian at dave.sebastian@wsj.com and Will Horner at william.horner@wsj.com

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