- Investors are selling off UK government bonds ahead of BoE’s deadline.
- The war in Ukraine is escalating, causing a lot of worry in the markets.
- There are uncertainties over China’s economy as COVID-19 cases rise.
E-mini Nasdaq-100 (NQ) futures edged lower as investors grappled with worries over the escalating Ukraine war and new COVID-19 cases in China ahead of US inflation data and earnings reports.
The British central bank announced yesterday that it would keep buying bonds this week. However, the mood swiftly turned negative in the late afternoon trade. BoE Governor Andrew Bailey instructed pension fund managers to rebalance their positions by Friday when bond buying would end.
UK bond yields are rising, closing in on levels before BoE’s initial intervention. It signifies that investors return to selling off their bonds as demand falls. Following the remarks, the E-mini Nasdaq-100 futures prices decreased, closing the day lower.
“The UK news shook up already nervous investors ahead of key US inflation readings Wednesday and Thursday. The readings are expected to prompt the Federal Reserve to keep raising interest rates aggressively,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.
US investors were alarmed by the impending BoE deadline since they feared some of the market turmoil in the UK could spread to Wall Street. Such an occurrence would cause a scramble for safety among investors as they sell off risky assets.
Regarding the Ukraine war, Russian missiles continued to bombard Ukraine for a second day after dozens of airstrikes on Monday that left 19 people dead, over 100 injured, and disrupted power supplies. As G7 leaders denounced Russia’s intensifying attacks in Ukraine, NATO reported that member states were stepping up security.
According to the International Monetary Fund, the potential for contagion and market stress spillovers has increased. It issued a warning on Tuesday about a disorderly market repricing. The probability of a severe downturn has increased to levels not seen since the start of the COVID-19 pandemic, according to the IMF, due to prolonged inflation, a slowdown in China, and ongoing strains from Russia’s invasion of Ukraine.
Concerns were heightened by reports from China that COVID-19 infections had increased in Shanghai and other cities, leading some local governments to close schools and leisure facilities. All these global issues could see the E-mini Nasdaq-100 (NQ) futures making new lows.