Stock futures flat, central banks in focus; Fed Chair Powell on deck as September rate bets leap; ECB set for biggest-ever hike as inflation roars, euro slumps; GameStop shares surge on FTX digital asset tie-up and California heat wave scorches, but power grid holds.
Here are five things you must know for Thursday, September 8:
1. — Stock Futures Flat, Central Banks In Focus
Wall Street futures edged modestly lower Thursday, while the dollar gave back recent gains against its global peers, as investors eyed a key rate decision from the European Central and a policy speech from Fed Chairman Jerome Powell.
Stocks are hoping to build on yesterday’s solid rally on Wall Street, which snapped the longest daily losing streak for the Nasdaq since 2016, amid a pullback in the dollar and bets on a so-called ‘soft landing’ for the U.S. economy.
Markets may get further clues on that direction from Chairman Powell’s speech later this morning in Washington, which begins just as ECB President Christine Lagarde will address the media in Frankfurt following a fully-expected 75 basis point rate hike.
The hawkish tone anticipated from both, however, was marginally offset by comments from Reserve Bank of Australia Governor Philip Lowe, who argued “case for a slower pace of increase in interest rates becomes stronger as the level of the cash rate rises” following a move earlier this week to boost the country’s key lending rate to a seven-year high of 3.25%
The dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.06% lower on the session at 109.766 while benchmark 2-year Treasury bond yields eased to 3.439%.
The softer dollar added upward pressure on oil prices, with the ongoing energy standoff between the European Union, which has proposed price caps for Russian oil exports, and Vladimir Putin providing further support.
WTI crude futures for October delivery were marked 32 cents higher on the session at $82.42 per barrel while Brent contacts for November, the global benchmark, added 25 cents to trade at $88.23 per barrel.
On Wall Street, futures contracts tied to the S&P 500 are indicating a modest 2 point opening bell decline while those linked to the Dow Jones Industrial Average are priced for a 13 point dip. Futures linked to the tech-focused Nasdaq are indicating a 3 point fall.
In overseas markets, Europe’s Stoxx 600 benchmark gained 0.17% in early Frankfurt trading ahead of the ECB rate decision, while the region-wide MSCI ex-Japan index rode last night’s rally on Wall Street to gain 0.31% from yesterday’s seven-month lows.
2. — Fed Chair Powell On Deck As September Rate Bets Leap
Federal Reserve Chairman Jerome Powell will speak as part of a monetary policy event hosted by the Cato Institute later today in Washington in what will be his last public appearance prior to the central bank’s rate decision later this month.
Powell will take part in a question-and-answer session moderated by Cato Institute CEO Peter Goettler at 9:10 am Eastern time as investors look for clues as to the size of the Fed’s anticipated rate hike on September 21 and the central bank’s policy path between now and the end of the year.
The CME Group’s FedWatch is pricing in an 82% chance of a 75 basis point rate hike, the third in succession, as investors look for a so-called ‘terminal’ Fed Funds rate that is north of 4% before Powell signals a paused in the monetary tightening.
“Powell likely will reiterate that rate decisions at individual Fed meetings are not pre-determined, and we remain of the view that the size of the hike at the meeting later thismonth largely will be determined by the inflation datanext week,” said Ian Shepherdson of Pantheon Macroeconomics.
3. — ECB Set For Biggest-Ever Hike As Inflation Roars, Euro Slumps
The European Central Bank is set to double-down on its first rate hike in eight years later today in Frankfurt with the biggest increase in its key lending rate since the euro adoption in 1999.
The ECB, which is battling both a looming recession linked in part to Russia’s war on Ukraine and the region’s escalating energy crisis, as well as record high inflation, is expected to lift its key refinancing rate by 75 basis points to 1.25% The Bank boosted the refi rate by 50 basis points in July as part of its first policy tightening effort since 2014.
That rate hike, as well as further hawkish signaling, hasn’t stopped the euro from slumping to a two-decade low against the dollar, adding yet another headache for ECB President Christine Lagarde.
The ECB will have no other choice but to send a strong signal to the market regarding its commitment to lower inflation and that they are able to curb the decline of the single currency,” said Saxo Bank strategists. “This is not an easy task.”
4. — GameStop Shares Surge On FTX Digital Asset Tie-Up
GameStop (GME) – Get GameStop Corporation Report shares jumped higher in pre-market trading after the video game retailer unveiled a new partnership with crypto exchange group FTX that offset a sixth consecutive quarterly loss.
GameStop unveiled its new business partnership with FTX, one of the world’s biggest cryptocurrency and derivative exchanges, that it said will “introduce more GameStop customers to FTX’s community and its marketplaces for digital assets.”
The agreement, which will help support its transition from a reliance on brick-and-mortar sales to a central role in the digital asset space, followed second quarter earnings data showing a narrower-than-expected loss of 35 per share on revenues of $1.136 billion.
GameStop shares were marked 10.2% higher in pre-market trading to indicate an opening bell price of $26.49 each, a move that would still leave the stock with a one-month decline of around 38.3%.
5. — California Heat Wave Scorches, But Power Grid Holds
California will enter the eighth day of its historic heatwave Thursday, with temperatures well in excess of 100 degrees up and down the state, but has thus far avoid power blackouts despite a record surge in energy demand.
The California Independent System Operator cancelled an emergency order that warned of rolling power outages on Wednesday, amid the highest usage of power — 52,061 megawatts — on record, as renewable replacements stabilized a near-overwhelmed grid.
Operators credited a system of text messaging, sent to more than 27 million state residents urging them to conserve power, for a big drop in grid pressure. Power usage dropped around 2,600 megawatts within 45 minutes, officials said.
Hurricane Kay, which is currently moving towards the Mexican coast some 220 miles south of San Diego, is expected to bring some relief from the heatwave later this week.
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