In This Article:
* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* S&P 500 futures flat, China markets on holiday
* Talk of more sanctions on Russia, end to gas sales
* Treasury yield curve inverts in recession warning
* U.S. 2-yr yield near 2.5% for first time since early 2019
By Wayne Cole
SYDNEY, April 4 (Reuters) - Share markets made cautious gains on Monday amid talk of more sanctions against Russia over its invasion of Ukraine, while bonds screamed the risk of a hard landing for the U.S. economy as short-term yields hit three-year highs.
A holiday in China made for sluggish trading, and MSCI's broadest index of Asia-Pacific shares outside Japan inched up 0.6%.
Japan's Nikkei added 0.1%, while S&P 500 stock futures and Nasdaq futures were flat. EUROSTOXX 50 futures firmed 0.2% and FTSE futures 0.4%.
While Russia-Ukraine peace talks dragged on, reports of Russian atrocities led Germany to say the West would agree to impose more sanctions in coming days.
Germany's defence minister also said the European Union must discuss banning imports of Russian gas, a step that would most likely send prices yet higher while forcing energy rationing in Europe.
Data last week showed inflation in the EU had already surged to a record high, piling pressure on the European Central Bank to rein in prices even as growth slows sharply.
"It really looks like it is time for the ECB to act," warned analysts at ANZ in a note. "While the ECB will be cautious about raising rates, it certainly looks like it should act sooner to abolish its QE programme."
The U.S. Federal Reserve has already raised rates and is predicted to do a lot more after Friday's solid March payrolls report. Several Fed officials are due to speak at public events this week, with the prospect of sending more hawkish signals, and minutes of the last policy meeting are due on Wednesday.
"We now expect the Fed to hike by 50bps in May, June, and July, before dialling the pace back slightly by delivering 25bps hikes at the September, November and December," said Kevin Cummins chief U.S. economist at NatWest Markets.
"This will bring the funds rate into restrictive territory sooner, with 2.50-2.75% by year-end 2022."
Investors reacted by hammering short-dated Treasuries and further inverting the yield curve as the market priced in the risk all this tightening would ultimately lead to recession.
On Monday, two-year yields were up at three-year highs of 2.49% and well above the 10-year at 2.410%.
The jump in yields has underpinned the U.S. dollar, particularly against the yen, given the Bank of Japan acted repeatedly last week to keep its bond yields near zero.