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Jobless Claims, U.S.-Taiwan Talks, Cohen's Rugpull - What's Moving Markets

Economy Aug 18, 2022 07:12
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By Geoffrey Smith 

Investing.com -- The U.S. releases a batch of economic data that are all likely to be pretty negative. The Biden administration is to start trade talks with Taiwan in the fall, following on from two high-level Congressional visits to the island this month. Chinese stocks fell, not helped by another dire update from a real estate developer. Stocks are in a holding pattern ahead of the data, with Cisco, the standout after strong earnings late on Wednesday. Bed Bath & Beyond is in for a tougher time after Ryan Cohen ends the short squeeze party. And Russia is threatening Europe with a catastrophic nuclear incident that it says will be caused by Ukrainian shelling of the Zaporizhzhya power plant. Here's what you need to know in financial markets on Thursday, 18th August.

1. U.S. data deluge: jobless claims, Philly Fed, and existing home sales

A trifecta of U.S. economic data at 08:30 ET (12:30 GMT) is likely to set the market’s course for the day, offering the latest insights into the housing and labor markets and the manufacturing sector.

The Philadelphia Federal Reserve’s business survey is likely to draw most attention, with the market looking for corroboration – or refutation – of the awful Empire State manufacturing survey earlier in the week. The Philly Fed survey tends to be a better reflection of national trends.

One number almost certain to be as dismal is Existing Home Sales data for July, which will most likely track weak developments already seen in the NAHB survey and housing starts and building permits numbers for the month.

Otherwise, initial jobless claims are expected to have inched up to 265,000 last week, which would represent a seven-month high.

2. U.S.-Taiwan trade talks

Nancy Pelosi's visit was no isolated incident. In the wake of a visit by senior Congressmen and women earlier this week, the U.S. announced late on Wednesday that it will begin talks on a new trade pact with Taiwan later this year.

The negotiations will cover technology and agriculture among other sectors, and will aim to find ways to respond to “distortive practices of state-owned enterprises and nonmarket policies and practices,” the U.S. Trade Representative’s office said, without naming the elephant across the Taiwan Straits. 

Taiwanese and Chinese stocks all fell on the fear of rising tension between the world’s two largest economies. Chinese sentiment wasn’t helped either by a big profit warning from Country Garden, the latest real estate developer to be stressed by the ongoing deleveraging crisis.

3. Stocks set to open slightly higher; Cisco in focus

U.S. stock markets are set to open a little higher after snapping a five-day winning streak on Wednesday.

The minutes from the Federal Reserve’s latest minute did little to support the hope that the central bank is close to ‘pivoting’ away from its efforts to tighten monetary policy, and comments from governor Michelle Bowman suggested that she still sees the bulk of the required labor market rebalancing as something still in the future. Rate hikes overnight in the Philippines and Norway left no room for doubt about the global monetary policy trend.

By 06:15 AM ET, Dow Jones futures were up 31 points, or less than 0.1%, while S&P 500 futures and Nasdaq 100 futures were both up 0.2%.

Stocks likely to be in focus later include Cisco (NASDAQ:CSCO), which is up smartly in premarket after a solid earnings beat late on Wednesday, and payments company Adyen (AS:ADYEN), where higher operating costs ate up too much of the company’s revenue growth in the second quarter.

The day's earnings roster keeps a heavy consumer bias, with Estee Lauder (NYSE:EL), Ross Stores (NASDAQ:ROST) and Tapestry (NYSE:TPR) all set to report. Applied Materials (NASDAQ:AMAT) is the late highlight.

4. Cohen’s rugpull

Another stock in focus will be meme stock Bed Bath & Beyond (NASDAQ:BBBY). Its recent rally came to a screeching halt after hours as GameStop (NYSE:GME) chairman Ryan Cohen, whose options-heavy entry into the stock had triggered a giant short-squeeze in recent days, filed to sell some of his holdings.

The news suggests that, rather than having a long-term plan for the company’s turnaround as with GameStop, Cohen is just another – if rather bigger – retail investor along for the ride.

Meme stocks such as GameStop, AMC Entertainment (NYSE:AMC), and Bed Bath & Beyond have all rallied strongly in thin summer markets in recent days, taking advantage of stretched short positions and the broader improvement in market sentiment.

5. Russia threatens incident at nuclear power plant, blames Ukraine

Russia warned Europe on Thursday of a possibly catastrophic nuclear incident due to fighting around the Zaporizhzhya power plant in Ukraine.

The Defense Ministry claimed that Ukraine’s armed forces are preparing a ‘provocation’ attack on the plant over the next two days that they intend to blame on Russia as a ‘false flag’ operation. Russia has used similar language before its invasion of Georgia in 2008 and of Finland in 1939 and also claimed the shooting down of a Malaysian airliner by its proxies in eastern Donetsk in 2014 was a false flag.  

The claims come as UN Secretary General Antonio Guterres – who has called for Russian forces to withdraw from around the plant to allow inspections by the International Atomic Energy Agency – is visiting Ukraine.

Jobless Claims, U.S.-Taiwan Talks, Cohen's Rugpull - What's Moving Markets
 

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