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Powell Reloaded, German Gas Alarm, Jobless Claims - What's Moving Markets

Economy Jun 23, 2022 07:02
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By Geoffrey Smith -- Federal Reserve Chair Jerome Powell heads to the House for a second day of Congressional testimony, as monetary tightening continues from the Philippines to Norway and, most likely, Egypt and Mexico. Germany sounds the alarm on natural gas supplies after Russia closes the taps, and the effects of the Ukraine war take an ever-greater toll on the French and German economies. Jobless claims are due, as are earnings from Accenture (NYSE:ACN), Darden Restaurants (NYSE:DRI), Rite Aid (NYSE:RAD) and - after the bell - FedEx (NYSE:FDX). And the government's oil inventory data are delayed by technical problems. Here's what you need to know in financial markets on Thursday, June 23.

1. Powell heads back to Congress; rate hikes continue around the world

Federal Reserve chairman Jerome Powell heads to the House of Representatives for the second day of his regular testimony on the state of the U.S. economy. Powell told the Senate on Wednesday that the risks of a recession have risen, but that the central bank will still prioritize bringing down the highest inflation in a generation.

Powell will take his seat minutes after the week’s update on jobless claims, which have been trending gently, but nonetheless, clearly upward in recent weeks. 

Elsewhere, the tightening of monetary policy around the world continued, with Norway’s central bank raising its key rate by 50 basis points to 1.25%, more than expected. The Philippines also raised, but only by 25 basis points, while Indonesia kept its key rate steady. The central banks of Egypt and Mexico are expected to hike by 50 and 75 basis points respectively when they meet later.

2. Germany sounds the gas alarm

European Natural Gas Futures hit a new three-month high as Germany moved a step closer to rationing natural gas supply, activating the second stage of a three-part plan to ensure security of supplies.

The move formalizes other actions already initiated by Berlin in recent days in response to a 60% cut in Russian gas supplies for reasons the government sees as politically-motivated.  However, the government won’t immediately activate a provision that would have enabled supplies to pass on price increases ahead of contractually-allowed adjustments.

The news comes on a day when the European Union will formally invite Ukraine – or what’s left of it - to join the bloc. Russian artillery strikes have intensified over the last week, damaging two grain export terminals owned by Canadian and U.S. companies in the port city of Mykolaiv. Ukrainian publications also reported that Russians have dismantled and removed the largest solar power plant in Ukraine, a 50-megawatt installation called TokMak.

3. Stocks set to open higher; Accenture, Darden, FedEx earnings due

U.S. stock markets are set to open moderately higher, as investors adjust to the latest commentary on the economic outlook from Powell and others.

By 06:15 AM ET (1015 GMT), Dow Jones futures were up 41 points, or 0.1%, while S&P 500 futures were up 0.3% and Nasdaq 100 futures were up 0.7%.  All three had edged down by between 0.1% and 0.2% after Powell’s first day of testimony.

Stocks likely to be in focus include Accenture and Darden Restaurants, which both report earnings before the open. They’ll provide an insight into current trends in business investment and consumer spending, respectively. FedEx, a bellwether of the online shopping and remote economy in general, reports after the close.

4. European economy slows further; U.K. by-elections eyed

Business activity in the eurozone slid to its lowest level in 16 months in June, as soaring inflation and rising interest rates took a bite out of demand and soured the economic outlook.

S&P Global’s flash June composite purchasing managers index - which combines data from the currency bloc's service and manufacturing sectors - slumped to 51.9 points, down from 54.8 in May, and below analyst estimates.

S&P also said that the U.K. economy was “running on empty” after business expectations there weakened to their lowest level in almost a year and a half. The latest in a string of weak U.K. data come ahead of two by-elections later Thursday, which are expected to show a big swing against the ruling Conservative Party.

5. Oil falls after big rise in API stockpiles, upbeat Iranian comments; EIA data delayed

Crude oil prices fell on optimistic noises out of Teheran on the prospects for a deal that could see western sanctions lifted, smoothing the path to world markets for Iranian exports.

By 6:25 AM ET, U.S. crude futures were down 0.8% at $105.39 a barrel, while Brent crude was down 0.7% at $110.98 a barrel.

There was more bad news for European fuel suppliers earlier as TotalEnergies (EPA:TTEF) was forced to shut down its Donges refinery in France. Elsewhere, the U.S. government said the Energy Information Administration’s weekly inventory data will be delayed due to technical problems. Parallel data from the oil and gas industry body API on Wednesday had shown the biggest weekly rise in crude stocks in over two months.

Powell Reloaded, German Gas Alarm, Jobless Claims - What's Moving Markets

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