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Bond Yields and Rate Hikes, Ford Warning, Housing Starts - What's Moving Markets

Economy Sep 20, 2022 06:10AM ET
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By Geoffrey Smith 

Investing.com -- Bond yields rise around the world as Sweden kicks off a week of big central bank meetings with a 100 basis point interest rate hike. Ford slumps after warning of big problems with supply chains and input costs. UnitedHealth gets some important support for its Change Healthcare acquisition. U.S. Housing Starts and Building Permits data are due as Germany's producer price inflation shocks. And crude oil prices are laboring still after the U.S. says it will extend the timeline of sales from its Strategic Petroleum Reserve. Here's what you need to know in financial markets on Tuesday, 20th September.

1. Sweden kicks off big week for central banks in style

Bond yields around the world rose almost in unison as global markets fretted about a likely wave of interest rate hikes by central banks this week.

Sweden’s Riksbank set an ominous precedent for the week, raising its policy rate by a full percentage point to 1.75%, prompting concerns that a step of that size may become the norm as monetary authorities try to rein in inflation. The Riksbank’s decision will be followed by one from the Federal Reserve and the Brazilian central bank on Wednesday, with the Bank of Japan, Bank of England, and Swiss National Bank all due on Thursday.

The benchmark 2-year U.S. Treasury note traded close to 4%, a level it hasn’t seen since 2007, while the German 2-Year note hit 1.696%, an 11-year high. Ten-year yields also rose, albeit by less.

2. Ford slumps after warning of supply chain problems

Ford Motor (NYSE:F) stock slumped 4.8% in premarket to its lowest in a month, after the automaker warned of $1 billion in cost overruns in the current quarter due to supply chain problems and other issues with input costs.

Ford said supply component shortages have stopped it from shipping high-margin products to dealers, meaning that as many as 45,000 vehicles may not reach dealers until the fourth quarter. The company, nonetheless, repeated its guidance.

Elsewhere, Chinese electric vehicle maker Leapmotor revived what would be one of Hong Kong’s biggest initial public offerings, aiming to raise over $1 billion to fund its expansion.

3. Stocks set to reverse Monday gains; UnitedHealth in spotlight

U.S. stock markets are set to open in a jittery mood later, spooked by the relentless rise in bond yields in recent weeks.

By 06:15 ET (10:15 GMT), Dow Jones futures were down 145 points or 0.5%, while S&P 500 futures were down in parallel, and Nasdaq 100 futures were down 0.6%. That all but reverses Monday’s gains.

Stocks other than Ford that are likely to be in focus later include UnitedHealth (NYSE:UNH), after a court ruling that bolstered its case for the $13 billion takeover of Change Healthcare (NASDAQ:CHNG), which the Biden Administration is resisting on antitrust grounds.

The earnings slate is largely empty today, although the first half-yearly report by Haleon (NYSE:HLN), the consumer health spin-off from GlaxoSmithKline (NYSE:GSK) in which Pfizer (NYSE:PFE) holds a stake, pushed the stock up 3.4% in London.

4. Housing starts, building permits - and a shocker from Germany

The U.S. housing market has been churning out grisly statistics for several months already, so there might not be too much downside potential left when August numbers for building permits and housing starts are released at 08:30 ET.

Housing starts are expected to have stayed largely unchanged – which would represent some progress after a drop of nearly 10% in July – but building permits, the more forward-looking indicator, are expected to have continued their downward trajectory.

The National Association of Homebuilders’ survey on Monday had suggested the problems of affordability, input cost inflation and high borrowing costs are all continuing to have a chilling effect on the sector.

Even so, it’s doubtful that either of the numbers will rival Germany’s producer price inflation for shock effect: the PPI rose nearly 8% on the month in August, leaving them up 45.8% from a year earlier, as soaring electricity prices crippled manufacturing in Europe’s largest economy.

5. Oil still laboring; API eyed

Crude oil prices continue to labor under the outlook for the world economy, as leaders gather in New York for the annual UN General Assembly. Reports that the U.S. intends to sell 10 million barrels from its Strategic Petroleum Reserve in November, extending the timeline of such sales, is also capping a modest bounce in prices.

By 6:30 ET, U.S. crude futures were up 0.2% at $85.53 a barrel, while Brent futures were up 0.4% at $92.36 a barrel.

The American Petroleum Institute will publish at 16:30 ET its estimate of U.S. crude and fuel stocks against a backdrop of reports suggesting U.S. demand for fuel has fallen for two straight months.

Bond Yields and Rate Hikes, Ford Warning, Housing Starts - What's Moving Markets
 

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Comments (7)
Hi Hi
Hi Hi Sep 20, 2022 10:49AM ET
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instead of stimulus in the form of QE, it had been targeted to regular people, the fed would not be backed into a corner with no good options
Gabe Domen
Gabe Domen Sep 20, 2022 9:21AM ET
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The hurricane will come if they want to lower inflation. The problem will be what economy will survive. The Fed did it wrong, with Powell (elected by trump), from the beginning. This time will do it, wrong, again. Get ready.
mamatha udaya
mamatha udaya Sep 20, 2022 9:21AM ET
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theoretical y they are increasing interest , but inflation is due to supply, this can be done by more production or by reducing consumption
Paul Kerber
Paul Kerber Sep 20, 2022 9:21AM ET
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If you want lower inflation more supply needs to be in the equation, containing demand thru higher rates seems counter intuitive. If you put suppliers at a disadvantage you're probably going to get stagflation. Higher rates curbs investment, I can't see it helping in the longer run, and so far not much to show for in the shorter. Supply Supply and more supply.
me ish
me ish Sep 20, 2022 9:11AM ET
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Biden's manipulating the price of oil to make things better into the run up to the mid terms, but he's massively reducing the US strategic oil stockpiles at at time they should be ramping them up in preparation for WW3 -Duh!!!
Joe Rizzuto
Joe Rizzuto Sep 20, 2022 8:35AM ET
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this fed has made mistake after mistake. they will do it again by raising rates to high to fast and crushing the labor and housing market. not a way to regain 'credibility'
Scott Bailey
Scott Bailey Sep 20, 2022 8:14AM ET
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What happened to the “Biden Bump” that every liberal was touting in 2020? He is destroying our economy with his crazy policies
taylor jason
taylor jason Sep 20, 2022 8:14AM ET
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actually most of the helicopter money policies were established by trump
Tyrone Jackson
Tyrone Jackson Sep 20, 2022 8:14AM ET
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2 years in and still blaming Trump?? Lol So when exactly does the current administration take responsibility??
Terry Barker
Terry Barker Sep 20, 2022 8:14AM ET
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That is the idea Scott
Warm Camp
Warm Camp Sep 20, 2022 7:42AM ET
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SPR releases will discontinue after US election date. Oil stocks are the best bets in this market and economic environment.
taylor jason
taylor jason Sep 20, 2022 7:42AM ET
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rig count is at a multi decade high and still climbing. supply/demand equation is fixing itself. also Iraq supply coming online too
Warm Camp
Warm Camp Sep 20, 2022 7:42AM ET
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taylor jason  SPR releases provide more than 10% of US supply now and it has to be replaced somehow after the elections. How? By hot air maybe? Understood now?
Andrew Ulferts
Andrew Ulferts Sep 20, 2022 7:42AM ET
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Warm Camp SPR must be replaced as well…. That’s going to be the real trick.
Warm Camp
Warm Camp Sep 20, 2022 7:42AM ET
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Andrew Ulferts  Biden will leave the replacement to next administration.
EL LA
EL LA Sep 20, 2022 7:42AM ET
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Warm Camp  I reimagined the SPR and believe Team Biden will refill the SPR with unicorn wishes and dreams.
Kaushal Shah
Kaushal Shah Sep 20, 2022 7:30AM ET
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can't afford rate hike at this junction of USA economy. it will be disaster.
Show previous replies (3)
Tommy Lambert
Tommy Lambert Sep 20, 2022 7:30AM ET
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The Strategic Petrileym Reseeve is already at the lowest since1986, and he wants to continue using it to buy votes? watxh out once the election is over. oil will sky rocket.
Jeff Chevalier
Jeff Chevalier Sep 20, 2022 7:30AM ET
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And if he didn't use it gas would be $5 a gallon and you'd complain about that.
me ish
me ish Sep 20, 2022 7:30AM ET
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Brad Albright  it's the "maintaining low unemployment that will not happen to achieve the other two - utterly impossible. And it's all been planned and by design to extract wealth and power to the top and decimating the economy at the same time - just watch!!!
Brad Albright
Brad Albright Sep 20, 2022 7:30AM ET
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me ish We will see, but in the mean time, I am curious why you think "the top" has an interest in decimating the economy. Just who are these people with such an interest? How do they bring this about, in your mind?
Brad Albright
Brad Albright Sep 20, 2022 7:30AM ET
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me ish Doesn't hold up when you think about it, does it?
 
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