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ECB Hosts Powell, NATO Digs In, Nio Shorted - What's Moving Markets

Economy Jun 29, 2022 07:04
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By Geoffrey Smith -- Jerome Powell is the European Central Bank's special guest at a central banking shindig. Fuel tax cuts take the edge off German inflation, but the underlying dynamic still looks strong. NATO puts 300,000 troops on high alert and prepares to welcome Sweden and Finland as members after Turkey drops its objections. Nio is hit by a short seller's report, and Tesla is laying off Autopilot staff. Oil climbs ahead of U.S. inventory data and U.S. stock markets look set for another weak opening. Here's what you need to know in financial markets on Wednesday, 29th June.

1. ECB hosts Powell, Bailey as Eurozone inflation stays strong

The second day of the European Central Bank’s shindig in Portugal will feature Federal Reserve Chair Jerome Powell and Bank of England Governor Andrew Bailey, in addition to the ever-present Christine Lagarde and other ECB notables.

The trio of governors will be joined for a discussion at 8 AM ET (1200 GMT) by Agustín Carstens, head of the Bank for International Settlements, which issued a stark warning about the risk of stagflation in the world economy in its annual report on Tuesday.

There was mixed economic news from the Eurozone earlier, as German inflation dipped, thanks to some temporary government tax cuts on transport (which, like the U.S. gas tax holiday, serve only to prop-up demand). Spain's surged beyond expectations, meanwhile. The ECB earlier said corporate borrowing expanded at its fastest pace in over a year as companies stocked up on cash before the anticipated rise in interest rates.

2. NATO beefs up presence in Europe to counter 'direct threat' from Russia

NATO is preparing for a new Cold War with Russia. Heads of government from the U.S.-led alliance are meeting in Madrid, Spain, on Wednesday, to agree – among other things – a permanent U.S. headquarters in Poland for its 5th Army and a reinforced naval and air presence in western Europe.

Two more squadrons of F-35 aircraft will be sent to the U.K., while the number of destroyers based in Spain will rise from four to six.

The moves are a response to what the alliance called a “direct threat” to European peace from Russia, which has launched three invasions of its neighbors in the last 14 years. Late on Tuesday, Turkey dropped its objections to Sweden and Finland joining the alliance, ditching neutrality policies that stretch back decades.

Also on Tuesday, the U.S. fired an economic warning shot in the direction of China, putting five companies on a blacklist for allegedly supporting the Russian military. China has cushioned the impact of western sanctions on Russia by boosting its purchases of Russian crude oil significantly in recent months.

3. Stocks set to open lower again; Spirit battle, Chapak in focus

U.S. stock markets are set to open mostly lower again later, after running into a fresh wall of selling on Tuesday as more investors take money off the table.

By 6:15 AM ET, Dow Jones futures were down 8 points, effectively unchanged from Tuesday, while S&P 500 futures were down 0.2%, and Nasdaq 100 futures were down 0.3%. The main cash indices had lost between 1.5% and 3% on Tuesday.

Stocks likely to be in focus later include Pinterest (NYSE:PINS), which has tapped Google’s e-commerce president Bill Ready as its new CEO, replacing Ben Silbermann, who is set to become executive chairman. Also in focus will be Walt Disney (NYSE:DIS), which extended the contract of CEO Bob Chapek on Tuesday, while the war for the hearts and minds of Spirit Airlines (NYSE:SAVE) shareholders continues in the run-up to Thursday’s vote.

4. Trouble in EV World

ADRs in Chinese electric vehicle maker Nio (NYSE:NIO) plunged in premarket after a short-selling report by Grizzly Research accused it of manipulating its sales data, by using an unconsolidated related party - Wuhan Weineng Battery Asset Management - to exaggerate its revenue and profitability.

Grizzly drew parallels with the fraudulent accounting of pharmaceutical company Valeant seven years ago. Nio denied the allegations in a statement but its ADRs were still down 7.8% in premarket, after falling 2.6% on Tuesday.

Elsewhere in the EV space, Tesla (NASDAQ:TSLA) is laying off hundreds of salaried workers on its self-styled Autopilot project, which still hasn’t delivered the full self-driving capability repeatedly promised by CEO Elon Musk over the years.

5. Oil rises on Libya troubles; U.S. Inventories due

Crude oil prices revived in overnight trading against a backdrop of ongoing problems in the key north African exporter of Libya, where the El Sider and Ras Lanuf terminals are still unable to export.

By 6:30 AM ET, U.S. crude prices were up 0.5% at $112.28 a barrel, while Brent crude was up 0.4% at $114.30 a barrel.

Elsewhere, Shell (LON:RDSa) CEO Ben van Beurden told a conference that he sees the global oil market tightening further as western buyers struggle to find alternative fuel sources to Russia. He noted that Europe won’t be able to replace the Russian gas it needs this winter with liquefied natural gas, due to capacity constraints.

The Energy Information Administration's weekly inventory data are due at 10:30 AM ET, as usual.

ECB Hosts Powell, NATO Digs In, Nio Shorted - What's Moving Markets

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