Rally falters as Russia, inflation concerns return

The global stock rally stalled on Wednesday as traders struggled to evaluate the risk of geopolitical tension in Ukraine and the impact of rising inflation on central bank policies.

The global stock rally stalled on Wednesday as traders struggled to evaluate the risk of geopolitical tension in Ukraine and the impact of rising inflation on central bank policies.

U.S. futures and Europe’s Stoxx 600 Index fluctuated after earlier extending Tuesday’s gains. Havens like gold and Treasuries were steady, while Italian government bond yields rose to the highest level in almost two years as investors braced for the European Central Bank to stop buying its debt.

The standoff between Russia and the West over Ukraine is continuing to vex markets as investors struggle to assess Moscow’s claim that some forces are being withdrawn. They’re also considering escalating costs and the likelihood of tightening monetary policy in places like the U.S. and the U.K., where inflation posted a surprise jump.

Oil recovered after the biggest one-day loss this year as worries about potential disruptions to commodity supplies eased. 

While Russian stocks rose to the highest level in a week, volatility gauges for the S&P 500 and the Treasury market are sitting significantly above 12-month averages, a sign that traders remain on edge. 

U.S. President Joe Biden said it’s still possible that Russia will invade Ukraine because its troops remain in a “threatening position,” while North Atlantic Treaty Organization Secretary General Jens Stoltenberg told reporters in Brussels that Russia is continuing its military build up. Moscow has repeatedly denied it plans to invade its neighboring country.