S&P 500 Futures drop more than 1.5% as Russia-Ukraine woes spread faster

• Market sentiment sours as Western warnings over Russian invasion of Ukraine gain more acceptance.
• S&P 500 Futures print four-day downtrend to poke January’s low, US Treasury yields begin the trading week on a back foot.
• US PMIs, geopolitics remains in focus, Fedspeak may entertain markets as well.

Risk-off mood amplifies during Tuesday’s Asian session as market fears over the Russian invasion of Ukraine gain stronger. Also weighing on the mood could be the Western reaction to Moscow’s readiness to shift military in Ukrainian states, as well as mixed concerns over Fed.

While portraying the mood, S&P 500 Futures drop 1.70% to 4,271, intraday low of 4,265.50, during the four-day downtrend that pokes 2022 bottom. On the same line were US 10-year Treasury yields, down 6.9 basis points (bps) to 1.863% by the press time.

Russian President Vladimir Putin’s ordering of troops inside Eastern Ukrainian states, citing them peacemaking efforts, recently triggered the market’s risk-off mood. Sentiment previously soured as Russia’s Putin recognized Donetsk and Luhansk in Eastern Ukraine as independent states and signed a decree "on friendship and cooperation".

In a reaction to Russian President Putin’s latest moves, the Western warnings of Moscow’s readiness for an imminent invasion of Ukraine gain more accolades and spoil the mood. Also negative for the risk appetite are the latest hints by the US, EU, Canada and the UK to criticize the Russian actions.

It should be noted that the UK and Canada are bracing for fresh sanctions on Moscow while Japan hints to stop the chip exports to Moscow if it invades Ukraine. Elsewhere, Australia PM Scott Morrison said that they will be in lockstep with allies on sanctions on Russia.

Recently, White House Deputy National Security Advisor mentioned, “We fully expect Russia to take military action.”

Elsewhere, risk-tone initially improved on Monday on news that the US agreed on the Biden-Putin summit before Russian President Putin signaled no concrete plans for the summit. However, an extended weekend in the US and Canada restricted the market reaction to the news.

On a different page, the recent Fedspeak has gone softer and weighed on the Fed Fund Futures. On Monday, Federal Reserve Board Governor Michelle Bowman followed the tunes of Chicago Fed President Charles Evans and New York Federal Reserve Bank President John Williams while saying, “It is too soon to tell if the Fed should hike 25 or 50bps in March.”

Moving on, the preliminary US PMIs for February will be crucial while Fedspeak and geopolitical news may gain more attention.

Read: UK PM Johnson to chair COBRA meeting, Canada, US prepares economic sanctions over Russian actions