By Geoffrey Smith
Investing.com -- The U.S. and EU agree on a deal to increase supplies of liquefied natural gas, helping Europe to wean itself off Russian energy dependence. German and Italian business confidence collapse as the war takes its toll on the regional economy. Apple (NASDAQ:AAPL) is reportedly looking at introducing subscription plans for its hardware, while the owners of the LA Dodgers and the Philadelphia 76ers face off in a battle to buy European soccer champions Chelsea from a sanctioned Russian oligarch. Here's what you need to know in financial markets on Friday, 25th March.
1. U.S., Europe strike gas supply deal
The U.S. agreed to increase supplies of liquefied natural gas to Europe, in an effort to help the EU wean itself off Russian gas imports.
A factsheet from the White House spoke of an “at least 15 billion cubic meters in 2022, with expected increases going forward.” By 2030, the two sides will aim to increase LNG shipments by 50 billion cubic meters a year from current levels.
While that is a substantial amount, it’s still not enough to replace all of the EU’s gas imports from Russia, which typically run well over 100 billion cubic meters a year.
The news was announced at a two-day EU summit attended by U.S. President Joe Biden. So far there has been no clarity on the bloc’s response to Kremlin demands that European buyers pay Gazprom (MCX:GAZP) for their gas in rubles in future.
2. European business confidence collapses as war takes its toll; VW postpones new EV launch
The effects of the war in Ukraine are starting to become evident in European economic data.
German business confidence cratered in March, the Ifo Business Climate index falling to a 14-month low of 90.8, while February’s index was also revised lower. Italy’s business confidence and consumer confidence indices also fell steeply. At the company level, Volkswagen (DE:VOWG_p) said it will have to push back the launch of its ID.5 electric car by a month due to a shortage of components from Ukraine.
In the U.K. meanwhile, core retail sales fell surprisingly in February by an alarming 0.7%, in contrast to expectations for a gain of 0.5%. Sterling fell 0.1% to $1.3171 in response, but the euro edged up to $1.1006 by 6:15 AM ET (1015 GMT), supported by the news of the gas agreement with the U.S.
3. Stocks set to open mixed; Michigan Consumer Sentiment, Williams' speech eyed
U.S. stock markets are set to open mixed later, but are on course to end the week at their highest since early February, having completely erased the losses suffered due to the invasion of Ukraine and fears of faster hikes in interest rates.
By 6:15 AM ET, Dow Jones futures were up 14 points, or less than 0.1%, while S&P 500 futures were up by a similar amount, but NASDAQ 100 Futures were inching lower.
The Michigan Consumer Sentiment index, due at 10 AM ET, will provide an instructive comparison with the relative impact of war on the European and U.S. economies. Pending home sales data for February are due at the same time, as is a speech by New York Federal Reserve President John Williams.
Stocks likely to be in focus later include Big Tech platforms, after the EU unveiled new draft legislation aiming at curbing their market power. Apple particularly will be in focus after a Bloomberg report saying that it is looking at launching subscription plans for its hardware, including iPhones.
4. Dodgers, 76ers owners face off over Chelsea
The race to buy London soccer club Chelsea has boiled down to a face-off between the owners of the LA Dodgers and the Philadelphia 76ers, according to various reports.
The two preferred bids, according to the Financial Times are from an investor group led by Dodgers owner Todd Boehly, and another led by Apollo’s Josh Harris and Blackstone (NYSE:BX) Group’s David Blitzer, whose portfolio of sports teams already includes the NHL’s New Jersey Devils and minority stakes in soccer clubs in Germany and the Benelux countries.
Chelsea have been owned by the Russian oligarch Roman Abramovich since 2003, whose relentless spending has transformed a once second-rate outfit into the current European and World club champions, without ever making it sustainably profitable. Various reports put the club’s value at around $4 billion. Abramovich’s assets have now been frozen by the U.K. government, making his ownership of the club untenable.
5. Oil slips on gas deal, China Covid fears
Crude oil prices slipped as the EU-U.S. gas deal encouraged optimism about ironing out the disruptions to world energy markets more broadly stemming from the West’s sanctions on Russia. Growing fears about the impact of Covid shutdowns on Chinese demand also weighed on prices, amid reports that independent refiners in China are running at their lowest utilization rates in months.
However, some upward pressure from European buyers urgently seeking replacement supplies still seems likely. German vice-chancellor Robert Habeck said earlier that Europe’s largest economy will halve its imports of Russian oil by the summer, and be almost independent of Russian gas by 2024.
By 6:40 AM ET, U.S. crude prices were down 1.5% at $110.63 a barrel, while Brent crude was down 1.1% at $117.77 a barrel.
The Baker Hughes rig count is due later, a day after the Dallas Federal Reserve's latest survey suggested that crude prices only need to average a little over $50 a barrel.