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Powell Lifts Dollar, Russia's Ambitions, China Oil Demand - What's Moving Markets

Economy Apr 22, 2022 06:43AM ET
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© Reuters

By Geoffrey Smith 

Investing.com -- Risk-off sentiment pervades global markets as Jerome Powell nails on a 50 basis point rate hike in May. The dollar surges against the pound and the yuan, in particular, as rate hike bets intensify. Oil prices tumble on growing fears about the impact of China's Zero-COVID policy on national demand. Russia signals it intends to completely dismember Ukraine. Gap stock tumbles after a profit warning and AB InBev is also struggling after confirming a $1 billion hit from exiting its Russia business. Verizon, Amex, and Schlumberger head the list of quarterly reports due. Here's what you need to know in financial markets on Friday, 22nd April.

1. Dollar, bond yields rise after Powell comments

The dollar surged again overnight and benchmark 10-year bond yields flirted with the 3% level after Federal Reserve Chair Jerome Powell all but confirmed that the central bank will raise its key rate by 50 basis points at its May meeting.

Powell had called the U.S. labor market "unsustainably hot" in comments on the sidelines of the IMF’s spring meeting on Thursday, endorsing the assessment given by many other senior Fed officials in the last couple of weeks.

By 6:15 AM ET, the 10-year U.S. Treasury yield had eased off to trade at 2.94%, down from an overnight high of 2.97%. The 2-Year yield, more sensitive to short-term interest rate expectations, had risen as high as 2.77% and only eased off marginally to 2.76%.

In foreign exchange markets, the dollar index rose 0.4%, while the greenback also surged against the offshore Chinese yuan, which is on course for its worst week since 2015 as the country grapples with a pandemic-driven slowdown.

2. Russia aims at conquest of southern Ukraine

Russia’s armed forces intend to conquer all of southern Ukraine, creating a contiguous zone of control stretching all the way to Ukraine’s border with Moldova, according to a briefing by senior military officials.

The plans would deny Ukraine control of any of its ports, cutting access to world markets for its key agricultural and industrial exports. They contrast sharply with President Vladimir Putin’s assertions before his invasion that he didn’t plan any occupation of Ukraine and are a conspicuous expansion of Russia’s war aims from only a week ago when it said it wanted to concentrate on ‘liberating’ the Donbas region of eastern Ukraine.

Separately, a pro-Kremlin news site posted, then withdrew, a report citing a closed Defense Ministry briefing that Russia had lost over 20,000 soldiers killed and missing in action since its invasion in February.

3. Stocks set to open lower; Gap slumps; Verizon, Amex earnings due

U.S. stocks are set to open in downbeat mood again later, extending Thursday’s heavy losses on the prospect of an aggressive tightening of U.S. monetary policy, even as signs start to emerge of the economy slowing down.

By 6:20 AM ET, Dow Jones futures were down 140 points, or 0.4%, while S&P 500 futures were down 0.3% and Nasdaq 100 futures were down in parallel. All three major cash indices had fallen by over 1% on Thursday, with the Nasdaq Composite falling 2.1%.

Stocks likely to be in focus later include Gap (NYSE:GPS), which slumped 13.5% in premarket after lowering its forecasts for the current quarter, and AB InBev (EBR:ABI), which said it will take a hit of $1.1 billion as it writes down the 24% stake it holds in a Russian joint venture. Also in focus will be Walt Disney (NYSE:DIS), after lawmakers in Florida voted to end its special tax status in the state.

Companies set to report earnings include Verizon (NYSE:VZ), American Express (NYSE:AXP), Newmont Goldcorp (NYSE:NEM) and Schlumberger (NYSE:SLB), while German software maker SAP (NYSE:SAP) fell short overnight with its quarterly figures, which also included a hit from a hasty Russian exit.

4. Services rescue Eurozone economy in April; U.K. retail sales plunge

The Eurozone economy held up better than expected in April, as a reopening service sector compensated for a manufacturing sector laboring ever more under the weight of supply chain disruptions, sky-high energy costs and the other knock-on effects of war in Ukraine.

S&P Global’s Eurozone composite purchasing managers’ index rose to 55.8 in April, indicating that the post-COVID expansion is still safe in the short term.

In the U.K., meanwhile, retail sales slumped in March and consumer confidence in April fell to its lowest since the depths of the 2008-9 financial crisis, against a backdrop of higher fuel prices and a 30-year high in inflation. The pound fell over 1% to $1.2887.

5. Oil falls as COVID hits China demand; rig count eyed

Oil prices fell some 2% overnight as fresh evidence emerged of the sharp drop in Chinese demand due to COVID-19 lockdowns which continue to plague the country.

Bloomberg reported that the country’s oil demand has fallen by around 1.2 million barrels a day in April, with demand for diesel, jet fuel, and gasoline falling by around 20% from year-earlier levels. Gasoline demand in eastern China, the country’s economic heart, has fallen some 40% this month, the agency quoted unnamed industry officials as saying.

By 6:30 AM ET, U.S. crude futures were down 2% at $101.72 a barrel, while Brent was down 1.6% at $106.58 a barrel.

The Baker Hughes rig count and the CFTC’s positioning data round off the week later, as usual.

Powell Lifts Dollar, Russia's Ambitions, China Oil Demand - What's Moving Markets
 

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Comments (7)
Bev Mcguffee
Bev Mcguffee Apr 22, 2022 10:00AM ET
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What a fiscal MESS!  Nothing financially good or stable has come from the Democrats controlling  Washington!  Biden knows less about financial growth; wealth preservation and investments than most teenagers graduating from high school.  The first most simple rule is to not spend more than you make. The second is to not bite the hand that feeds (businesses and entrepreneurs who produce jobs and  supplies).  November and the Mid-term elections cannot come soon enough!
First Last
First Last Apr 22, 2022 10:00AM ET
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It's a Russian-caused mess
James Johannsen
James Johannsen Apr 22, 2022 10:00AM ET
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yeah the Russians made us print since 2008 like drunken sailors
First Last
First Last Apr 22, 2022 10:00AM ET
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James Johannsen   They did.  Along w/ the CCP, they've been causing the rest of the world to spend more on defense.  but my post above was about Russia invading Ukraine.
Gary Smith
Gary Smith Apr 22, 2022 9:30AM ET
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There is a decent amount of short interest on shares out there at the moment. Across my portfolio people are shorting 5% to 15% of available shortable shares. And these companies are strong. Crazy. It is just institutions looking to cause volatility to shake people out. I am holding. The whole thing is bogus.
Marco cuevas
Marco cuevas Apr 22, 2022 9:26AM ET
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Dog eat dog world in hedge fund land as financials have to pey investors, themselves, and operations sell sell.sell...prepare for a red Friday business as usual in the biggest racket in the world the US Stock.Exchange.
Marco cuevas
Marco cuevas Apr 22, 2022 9:04AM ET
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Uhoh Friday you know what that means...time for big money to sell.and take away your meager gains.
Jack Peterson
Jack Peterson Apr 22, 2022 7:26AM ET
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Thank you and well said…
Tims Mopheme
Tims Mopheme Apr 22, 2022 6:55AM ET
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Where are these bull *******investors stays Who are theyHow do we see them?
Tims Mopheme
Tims Mopheme Apr 22, 2022 6:54AM ET
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Its pointless to be a trader these days , these investors where are they gathering to sell off the market ??.. I believe they dont exist as long as theyre not mentioned by their names! Bible says , whatever that exists has already have a name!.. Please editor who these investors that you are always talking about? Is it a casino ?.. where do they make collective decicion ?.. at what point do you get the source to know them??? I want answers
First Last
First Last Apr 22, 2022 6:54AM ET
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"Bible says, whatever that exists has already have a name" -- False.  Before the 20th century, we neither knew of nor named the quarks & leptons.
 
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