Powell raises the dollar, Russia’s ambitions and China’s oil demand

By Geoffrey Smith

Investing.com — Risk aversion sentiment permeates global markets as Jerome Powell nails a 50 basis point rate hike in May. The dollar is surging against the pound and the yuan, in particular, as bets on higher rates intensify. Oil prices are falling due to growing fears over the impact of China’s Zero-COVID policy on domestic demand. Russia signals its intention to completely dismember Ukraine. Gap stock tumbles after a profit warning and AB InBev is also struggling after confirming a $1 billion hit following the exit of its Russia business. Verizon, Amex and Schlumberger top the list of quarterly reports due. Here’s what you need to know in financial markets on Friday, April 22.

1. Dollar, bond yields rise after Powell comments

The dollar jumped again overnight and benchmark 10-year bond yields flirted with the 3% level after Federal Reserve Chairman Jerome Powell virtually confirmed that the central bank would raise its benchmark 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, agreeing with the assessment given by many other senior Fed officials over the past two weeks.

As of 6:15 a.m. ET, the 10-year U.S. Treasury yield had eased to trade at 2.94%, down from a high of 2.97%. The 2-year yield, which is more sensitive to short-term interest rate expectations, had climbed to 2.77% and fell only slightly to 2.76%.

In the currency markets, the dollar index rose 0.4%, while the greenback also surged against the offshore Chinese yuan, which is on track for its worst week since 2015 as the country is struggling with a slowdown due to the pandemic.

2. Russia aims to conquer southern Ukraine

Russian Armed Forces the intention to conquer all of southern Ukrainecreating a contiguous zone of control stretching to the Ukraine-Moldova border, according to a briefing from senior military officials.

The plans would deprive Ukraine of control of one of its ports, cutting off access to world markets for its key agricultural and industrial exports. They stand in stark contrast to President Vladimir Putin’s claims before his invasion that he had planned no occupation of Ukraine and are a clear extension of Russia’s war aims of only a week ago, when it said he wanted to focus on the “liberation” of the Donbass region. Eastern Ukraine.

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

3. Stocks should open lower; The gap is collapsing; Verizon and Amex revenue expected

US stocks are set to open again on a pessimistic mood later, extending Thursday’s heavy losses on the prospect of aggressive US monetary policy tightening, even as signs begin to emerge that the economy is slowing.

As of 6:20 a.m. ET, Dow Jones futures were down 140 points, or 0.4%, while S&P 500 futures were down 0.3% and futures on the Nasdaq 100 were down in parallel. All three major currency indices had fallen more than 1% on Thursday, with the Nasdaq Composite dropping 2.1%.

Stocks likely to be targeted later include Gap (NYSE:GPS), which fell 13.5% pre-market after lowering its guidance for the current quarter, and AB InBev (EBR:ABI), which said it take a $1.1 billion hit because it writes down the 24% stake it holds in a Russian joint venture. Walt Disney (NYSE:DIS) will also be in the spotlight, after Florida lawmakers voted to end his special tax status in the state.

Companies that must declare their profits include Verizon (NYSE:VZ), American Express (NYSE:AXP), Newmont Goldcorp (NYSE:NEM) and Schlumberger (NYSE:SLB), while the German software maker SAP (NYSE:SAP) failed overnight with its quarterly figureswhich also included a hit of a hasty Russian exit.

4. Services save the euro zone economy in April; UK retail sales plummet

The eurozone economy held up better than expected in Aprilas the reopening of the services sector has offset a manufacturing sector that is increasingly struggling under the weight of supply chain disruptions, sky-high energy costs and other ripple effects of war in Ukraine.

S&P Global Composite Eurozone Purchasing Managers Index rose to 55.8 in April, indicating that the post-COVID expansion is still safe in the short term.

In the UK, meanwhile, retail sales collapsed in March and consumer confidence in April fell to its lowest level since the depths of the 2008-2009 financial crisis, in a context of rising fuel prices and inflation at their highest for 30 years. The pound fell more than 1% to $1.2887.

5. Oil Falls as COVID Hits Chinese Demand; eyed platform account

Oil prices fell around 2% overnight as new evidence emerged of China’s sharp drop in demand due to the country’s continuing COVID-19 lockdowns.

Bloomberg reported that the country’s oil demand fell about 1.2 million barrels a day in April, with demand for diesel, jet fuel and gasoline falling about 20% from l ‘last year. Gasoline demand in eastern China, the country’s economic heartland, fell about 40% this month, the agency said citing unnamed industry officials.

As of 6:30 a.m. 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 number of platforms and the CFTC positioning data rounds the week later, as usual.

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Felix J. Dixon