New York: Stocks rallied as oil tumbled and a widely watched manufacturing-gauge came in much weaker than expected, easing fears about more aggressive Federal Reserve tightening that could stifle economic growth.
Beaten-down tech shares led gains in the S&P 500, with the Nasdaq 100 outperforming after a plunge of more than 20 per cent from a record. West Texas Intermediate crude sank below $100 a barrel amid signals that Iran nuclear talks may resume, paving the way for more oil supply to come into the market while intensifying lockdowns in China introduced risks to global demand. Treasury two-year yields were little changed ahead of the Fed's policy decision.
Prices paid to US producers rose strongly in February, underscoring inflationary pressures that will likely set the stage for the Fed's first rate hike since 2018 on Wednesday. Still, officials will have to balance curbing higher prices without crashing the economy into a recession. A separate report Tuesday showed New York state manufacturing activity weakened considerably in early March as orders fell and delivery times lengthened.
Ukraine and Russia will resume talks on Wednesday as a key adviser to Ukrainian President Volodymyr Zelenskiy called the negotiations "difficult and viscous," but acknowledged there is room for compromise. President Joe Biden will travel to Brussels next week to meet with NATO allies and take part in a summit of European Union leaders as Russia presses on with its invasion of Ukraine.
Elsewhere, the yuan erased losses on a news report that Saudi Arabia is in active talks with Beijing to price some of its oil sales to the Asian nation in the currency. Base metals slid as coronavirus outbreaks in China threatened to curtail the country's economic output, hitting demand in the world's top consumer of raw materials.
Asia gets a boost
Stocks rose in Asia Wednesday as Chinese technology shares rebounded from a brutal selloff, though investors remain braced for volatility surrounding Russia's war in Ukraine and a looming Federal Reserve decision.
An Asia-Pacific share gauge snapped a three-day drop and a Hong Kong index of Chinese tech firms added about 5 per cent. The S&P 500, Nasdaq 100 and European futures were steady following a Wall Street advance on Tuesday.
China's equities have been under severe pressure on regulatory fears and speculation that Beijing's ties with Russia raise the risk of a US backlash. Questions remain about whether rallies will be anything more than temporary.
West Texas Intermediate crude pared recent losses but remained below $100 a barrel. Signs that Iran nuclear talks may resume point to the possibility of more supply, while Covid lockdowns in China may curb demand.
A quarter-point Fed rate increase, the first since 2018, to fight high inflation is widely anticipated but there's less certainty beyond that. While markets expect a total of seven such moves this year, policy makers also have to factor in growth risks emanating from the war and the isolation of Russia in retaliation.
"The confluence of events leading in to this meeting puts policy makers in a very unenviable position," Matt Rowe, executive director at Nomura Securities International Inc., said on Bloomberg Television. "It's being publicly debated whether if you create a recession to push the number down to 2%, is that actually a policy error?" he added, referring to inflation.