European Bonds Climb, Stocks Retreat As Traders Watch Ukraine-Russia Developments

Bonds climbed and stocks retreated as traders tracked the latest news from Russia’s war against Ukraine and speculation over President-elect Donald Trump’s picks for Treasury secretary. 

S&P 500 futures dipped after a document showed that Russia is pushing ahead with a nuclear doctrine that allows it to expand use of atomic weapons. Europe’s Stoxx 600 Index slid 0.9%. The yield on 10-year Treasuries fell seven basis points to 4.34%. For the equivalent German bond, yields dropped to the lowest since October. 

While the moves were relatively small on Tuesday, they underscored a sense of worry in markets about the war in Ukraine. The document posted online showed that President Vladimir Putin signed a decree allowing Russia to fire nuclear weapons in response to a massive conventional attack on its soil.

It follows US President Joe Biden’s decision to allow Ukraine’s Volodymyr Zelenskiy to attack military targets in Russia using US-made long-range weapon. A report from RBC- Ukraine said the first such strike has taken place.  

“The market reaction is logical, one could feel already yesterday that the tension, was rising,” said Andrea Tueni, head of sales trading at Saxo Banque France. “For the moment the market reaction is contained, some are still in a wait-and see-mode.”

Traditional haven assets including the Japanese yen, Swiss
franc and gold gained. Also on Tuesday, traders were discussing how Trump’s nomination of Treasury secretary could shape policy. The transition team is considering pairing Kevin Warsh, a former Federal Reserve official, in the Treasury secretary role, with hedge fund manager Scott Bessent as director of the White House’s National Economic Council, according to people familiar with the matter.

“A more measured and experienced team in financial leadership positions in the US government will be positive for investor confidence,” said Rajeev De Mello, a global macro portfolio manager at Gama Asset Management. 
Meanwhile, Bitcoin is back in the vicinity of an all-time high, climbing above $91,000. The digital asset has been supported by a series of developments highlighting the deepening embrace of the digital-asset industry by Trump.
Trump Media & Technology Group Corp. is in talks to buy digital-asset marketplace Bakkt Holdings Inc. And Nasdaq Inc.’s is planning to list options on the $43 billion iShares Bitcoin Trust as early as Tuesday. 

Key events this week:

• Eurozone CPI, Tuesday

• US housing starts, Tuesday

• Fed’s Jeff Schmid speaks, Tuesday

• China loan prime rates, Wednesday

• Nvidia earnings, Wednesday

• Fed’s Lisa Cook and Michelle Bowman speak, Wednesday

• Eurozone consumer confidence, Thursday

• US existing home sales, initial jobless claims, Philadelphia Fed factory index, Thursday

• Eurozone HCOB Manufacturing & Services PMI, Friday

• US University of Michigan consumer sentiment, S&P Global
  Manufacturing & Services PMI, Friday
  

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 fell 0.8% as of 9:29 a.m. London time

• S&P 500 futures fell 0.5%

• Nasdaq 100 futures fell 0.6%

• Futures on the Dow Jones Industrial Average fell 0.2%

• The MSCI Asia Pacific Index rose 1%

• The MSCI Emerging Markets Index rose 0.5%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%

• The euro fell 0.6% to $1.0533

• The Japanese yen rose 0.8% to 153.41 per dollar

• The offshore yuan fell 0.2% to 7.2444 per dollar

• The British pound fell 0.4% to $1.2623

Cryptocurrencies

• Bitcoin was little changed at $91,290.39

• Ether fell 1.6% to $3,098.99

Bonds

• The yield on 10-year Treasuries declined seven basis points to
  4.35%

• Germany’s 10-year yield declined 10 basis points to 2.27%

• Britain’s 10-year yield declined eight basis points to 4.39%

Commodities

• Brent crude fell 0.5% to $72.90 a barrel

• Spot gold rose 0.7% to $2,629.65 an ounce