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Powell in the Hole, PC Warnings, China Regulation - What's Moving Markets

EconomyAug 27, 2021 06:44AM ET
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© Reuters

By Geoffrey Smith 

Investing.com -- Jerome Powell will likely signal when the Federal Reserve intends to start tightening monetary policy by reducing its bond purchases. HP (NYSE:HPQ)'s warning about lengthening backlogs deepens the gloom for semiconductor users. Peloton slumps after cutting prices for its most popular bike. China issues yet more rules to curb the power of its Internet companies, and oil is up as Tropical Storm Ida starts to force operators in the Gulf of Mexico to shut down. Here's what you need to know in financial markets on Friday, 27th August.

1. Powell's Jackson Hole keynote speech

The most hotly-anticipated event of the week/month/year/millennium (delete as appropriate) is finally upon us.

Federal Reserve Chairman Jerome Powell will speak at the central bank’s annual research symposium at Jackson Hole at 10 AM ET (1400 GMT), and should give clear guidance as to the timeline for reducing the Fed’s bond purchases.

Running at $120 billion a month since the first wave of the pandemic, these have underpinned global demand for dollars during a time of extreme market stress, as well as enabling the financing of emergency federal government support to the economy. Three of Powell’s colleagues on Thursday suggested that the current degree of accommodation was no longer necessary, given how far the U.S. economy has recovered. None of the three has a vote on this year’s policy-setting committee, however.

2. HP warning casts gloom over PC industry

There was further evidence that the shortage of semiconductors will disrupt the production of hardware for some time to come, after HP warned in its quarterly results update that it won’t be able to meet all orders for its PCs and laptops in the current quarter.

HP’s news sent both its own stock and that of rival PC maker Dell down by over 5% in after-hours trading on Thursday.

The news came on the same day that Taiwan Semiconductor Manufacturing (NYSE:TSM), one of the world’s largest contract manufacturers of chips for other companies, said it would raise prices by between 10%-20%.

Most of the world’s major automakers have announced in recent weeks that they will have to reduce output in the current quarter due to shortages of chips and other components, a problem compounded by ongoing snarl-ups in the global shipping industry due to lockdowns in China.

3. Stocks set to open higher; Peloton slumps after price cut, wider loss

U.S. stock markets are set to open higher later, recovering some of Thursday’s losses, with their subsequent direction overwhelmingly dependent on the message sent by Powell from Jackson Hole.

By 6:15 AM ET (1015 GMT), Dow Jones futures were up 89 points, or 0.3%, while S&P 500 and Nasdaq 100 futures were both up a little more than 0.3%.

Powell will deliver his comments with markets still close to all-time highs, supported by the unprecedented amounts of liquidity the central bank has created since last spring.

Aside from Dell and HP, stocks likely to be in focus later include Workday (NASDAQ:WDAY), which rounded off a stellar week for enterprise software companies with its earnings after the bell on Thursday, and Marvell (NASDAQ:MRVL), which also beat expectations. Peloton Interactive (NASDAQ:PTON) is likely to underperform after announcing late Thursday a big price cut to its most popular exercise bike and a wider loss than expected.

4. China smites the Internet sector again

China’s Cyberspace regulator issued a new set of draft regulations with potentially far-reaching impacts on the country’s Internet companies, the latest in a series of regulatory actions designed to crimp both their economic and their potential political power.

The new regulations would outlaw algorithms designed to encourage addiction, or what it called ‘excessive compulsion’, something likely to affect both social media and gaming companies. They also include provisions relating to national security and public order.

In related news, China’s Supreme Court issued a new set of ‘model’ cases that seeks to strengthen workers’ rights, as part of the government’s plans to reduce income inequalities.

Separately, The Wall Street Journal reported that Beijing is preparing to ban companies with sensitive data from listing in the U.S., in further evidence of the world’s two largest capital markets divorcing.

5. Oil rises as storm approaches; Libya to cut supply

Crude oil prices rose ahead of Jerome Powell’s speech, which is likely to influence prices later in the day through its effect on the price of the dollar. A higher dollar will likely weigh on prices, and vice versa.

Also supporting prices was the news that the biggest operating division of Libya’s National Oil Company will be forced to suspend production – currently running at over 200,000 barrels a day – due to government haggling over budget receipts, which have left it unable to pay for wages and other input costs.

By 6:30 AM ET, U.S. crude futures were up 1.6% at $68.50 a barrel, while Brent futures were up 1.4% at $71.18 a barrel. Baker Hughes rig count data and the Commodity Futures Trading Commission’s figures on net speculative positions round off the day, with the market also keeping an eye on updates on the progress of Tropical Storm Ida.

Powell in the Hole, PC Warnings, China Regulation - What's Moving Markets
 

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Comments (18)
luckyyy gold
luckyyy gold Aug 27, 2021 10:46AM ET
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Blame these guys for the natural gas inflate again. They have mess up the commoditiry market
luckyyy gold
luckyyy gold Aug 27, 2021 10:45AM ET
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What u expect from him? A weak guy same like his president. They have no idea and fear to execute.
Meru Pet
Meru Pet Aug 27, 2021 9:49AM ET
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so... Powell ?
Drupal Grupal
Drupal Grupal Aug 27, 2021 9:32AM ET
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current inflation has nothing to do with money supply or cost of money so I think whatever direction fed takes will be inconsequential. it is about the the supply chain issues that are going to linger. just look at the inventory numbers that came out today, it fell from 1% to 0.6% and store shelves are getting emptier
me ish
me ish Aug 27, 2021 9:32AM ET
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yes and we also see in the article Taiwan Semi increasing chip prices by 10 to 20% - there are many items that are going to remain far more expensive - we've also got fundamental changes in the labour market with wages increasing significantly to fill loads of unfilled jobs - this will also push up prices - long term inflation is here - FED is going to make a "deliberate" mistake by letting inflation overshoot, as they want large inflation - only way to reduce the massive US debt - so they will ask forgiveness later, but this is all deliberate to allow inflation to run away. It's going to get very messy in the next few months, but I have a feeling the markets are going to look forward, anticipate this and sell off a month or so before any tapering.
Kaveh Sun
Kaveh Sun Aug 27, 2021 9:10AM ET
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All traders want to hear from Powell tune. Is the tune still the same or a tiny bit different. In the old days, traders look at the chairman’s briefcase. If fed tells u what n when, other countries will front run them. If Everybody front runs the fed, then fed lost control.
Jon Bal
Jon Bal Aug 27, 2021 9:10AM ET
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hey I remember greenspan's briefcase indicator.  if it was thicker than last time it meant changes haha.
Abhay Agrawal
Abhay Agrawal Aug 27, 2021 8:45AM ET
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powellls speech will be neutral or non event.the bottom line is that USA debt is increasing so they want to keep the interest rate low so that they have to pay less.And lower interest rates are causing higher inflation so the people have to pay more.now who will pay more this is to be decided.the richer will pay more thats the people of USA not the government (poor)
Meru Pet
Meru Pet Aug 27, 2021 8:45AM ET
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may be not today
frank zapper
frank zapper Aug 27, 2021 8:32AM ET
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lmaooooo Afghanistan dont mean squat to the world markets. they make nothing buy almost nothing and have nothing. the only ones concerned is the military industry complex.
milena villa escobar
milena villa escobar Aug 27, 2021 8:32AM ET
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When  it brings down Joe Biden and Kamala Harris becomes president and pushes through a 20 trillion dollar spending package for social programs you'll stop laughing tout suite.  millennial bro
ROBERTO CARLORITA
ROBERTO CARLORITA Aug 27, 2021 8:32AM ET
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milena villa escobar  Trump was the most cruel and perverse person the world has ever had. he also did a lot of things in government that went wrong. he was the president most criticized for wrongdoing. Biden only fulfilled the deal that Trump made with the Taliban. Biden is only being criticized for something he is not to blame, and the reason is thanks to the Trump deal.
me ish
me ish Aug 27, 2021 8:32AM ET
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Hiya Frank - but the USA IS the MIC - and there is 3 trillion USD worth of very sought after resources to mine in Afghanistan and it's a geopolitical cross roads of the world - from a strategic point of view, the US should be controlling it, or Russia/China control it - those rare earth elements in the ground are vital for military hypersonic hardware. Of course, the markets aren't going to bother about any of that, as they don't look or discount that far ahead, but long term, it is a big deal.
milena villa escobar
milena villa escobar Aug 27, 2021 8:03AM ET
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Don't wait on Powell's speech today. He's going to say if this happens we're going to do that and if that happens we're going to do this and since we don't know what's going to happen we don't know what we're going to do. Thank you for coming
frank zapper
frank zapper Aug 27, 2021 8:03AM ET
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absolutely
milena villa escobar
milena villa escobar Aug 27, 2021 7:26AM ET
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Funny when you look at news outlets from around the world the first three or four stores are all about Afghanistan where Americans are dying at daily record rates.  On the site you get "Powell in the hole"
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milena villa escobar
milena villa escobar Aug 27, 2021 7:26AM ET
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Lana Haley  I already call when Trump was president it was a political site. I guess they changed the format.  Anyway I'm pretty sure investors are more concerned with how Afghanistan is going to play out and how that might affect financial markets than another 40 minutes of Powell babbling about nothing
Artchelle Castro
Artchelle Castro Aug 27, 2021 7:26AM ET
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Too soon?
tim banks
tim banks Aug 27, 2021 7:26AM ET
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2000 Americans dying everyday from covid. 98% unvaccinated. Afghanistan ***but doesn't really affect things other than defense stocks.
Jose Cabreja
Jose Cabreja Aug 27, 2021 7:26AM ET
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you sound like CNN 🤣 1st it was get vaccinated to end covid..as soon as vaccinated ppl started testing + it was changed to get vaccinated so u won't end in ER..now the is unvaccinated vs Vaccinated 🤣🤣🤣🤡 vaccinated ppl dying too..media just saying they're dying bc something other than the vaccine/covid19.
ROBERTO CARLORITA
ROBERTO CARLORITA Aug 27, 2021 7:26AM ET
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Trump was the most cruel and perverse person the world has ever had, when we have a dictator it is common to have so much news about him. he also did a lot of things in government that went wrong. he was the president most criticized for wrongdoing. Biden only fulfilled the deal that Trump made with the Taliban. Biden is only being criticized for something he is not to blame, and the reason is thanks to the Trump deal.
Tyrone Jackson
Tyrone Jackson Aug 27, 2021 7:20AM ET
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Meanwhile Biden is has blood on his hands of 150 blown apart bodies. And so do all who voted for him. You thought this guy could run a country? Your were dead wrong.
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Bryan Ojeda
Bryan Ojeda Aug 27, 2021 7:20AM ET
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War is a ******business. If you're sensitive to death and destruction then dont play it.
Rustam Garaev
235666 Aug 27, 2021 7:20AM ET
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He was voted for to be formally in charge. Other guys run a country.
Michael Ferreira
Michael Ferreira Aug 27, 2021 7:20AM ET
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hey Tyrone I bet u could run things better haha my
Glenn Ebersole
Glenn Ebersole Aug 27, 2021 7:20AM ET
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Like Bush being in control of the Twin Towers, and Pentagon on 9/11?
ROBERTO CARLORITA
ROBERTO CARLORITA Aug 27, 2021 7:20AM ET
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Trump also has in his hands the death of hundreds of soldiers, he made the worst administration. Biden was supposed to do what? abandon all? soldiers serve to protect people. Biden is not to blame for a ****attack.
Thomas Meyer
Thomas Meyer Aug 27, 2021 7:10AM ET
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meanwhile in Afghanistan
Bryan Ojeda
Bryan Ojeda Aug 27, 2021 7:10AM ET
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and? war is america's hobby get used to it.
Franco Dominguez
Franco Dominguez Aug 27, 2021 7:07AM ET
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powell speech: you are the next generation anf unemployment is high, not tapering
YouTube Account
YouTube Account Aug 27, 2021 7:07AM ET
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If his speech today is as much gibberish as his recent definition of "transitory" then it will defy translation into English. The bottom line is the printing will continue until some institutional failures appear in the banking system. The junkie always needs more.
Kad Kadz
Kad Kadz Aug 27, 2021 7:02AM ET
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what to expect for XAU/USD from this speech?
hassan khan
hassan khan Aug 27, 2021 7:01AM ET
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Md Emran
Md Emran Aug 27, 2021 6:52AM ET
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Yes
hassan khan
hassan khan Aug 27, 2021 6:52AM ET
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bbfg
Kurt Maxberry
Kurt Maxberry Aug 27, 2021 6:51AM ET
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Fed isnt going to do ****** Just keep spending us money to create the biggest bubble to buy up more property to go party in with young girls.
Thuan Bui
Thuan Bui Aug 27, 2021 6:51AM ET
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Few decades later those young girls will be revealed as underaged and groomed 🤣🤣🤣
Franco Dominguez
Franco Dominguez Aug 27, 2021 6:51AM ET
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and more homeless than🇦🇫🇦🇫🇦🇫
Fomo Overdrive
Fomo Overdrive Aug 27, 2021 6:51AM ET
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Ha ha ha ha journalism is dead "and should give clear guidance as to the timeline for reducing the Fed’s bond purchases."
 
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