Ukraine crisis: Stocks rise with bond yields amid 'soft' sanctions

European equities rose with US futures on Wednesday as investors assessed limited initial Western sanctions against Russia amid the Ukraine stand-off. 

The Stoxx 600 Europe Index and S&P 500 futures both added around 0.8 per cent, while contracts on the Nasdaq 100 gained more than 1 per cent. The mood was brighter than Tuesday, when the S&P 500 fell into a technical correction after sliding 10 per cent from a January peak. 

US President Joe Biden said Russia had started to invade Ukraine and announced steps targeting Russia’s sale of sovereign debt abroad, its elites, and a pair of banks. The sanctions — and others by US allies — stopped short of sweeping measures, though officials warned they could be scaled up. “The softer-than-feared sanctions somewhat help lifting the mood,” Ipek Ozkardeskaya, senior analyst at Swissquote, wrote in a note, adding, “The risk appetite is limited, of course, except in some key assets, including oil and commodities.” 

Treasuries extended declines after the yield curve flattened in the Wall Street session. Crude oil fluctuated, while gold dipped as haven demand eased. The dollar slipped.

 

Fears that the Ukraine tension could snarl commodity supplies has bolstered everything from energy to wheat and nickel. Oil paused a blistering rally after the measures against Russia were announced, with Brent crude trading at $96 a barrel after a jump on Tuesday that saw it climb to a 15-year high.

A key question is whether or not the jump in raw material costs stirred by the stand-off will spur more aggressive central bank policy. Bets on the number of rate increases by the US Federal Reserve in 2022 have settled at around six 25-basis-point hikes, down from seven on February 11. 

For the European Central Bank (ECB), swaps suggest the first quarter-point move will take place by October, compared with September earlier in the month.