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Michigan Index, EU Summit, FedEx Earnings, OPEC+ Meeting – What’s Moving Markets

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By Peter Nurse 

Investing.com — Wall Street heads for a positive close to the week, snapping a three-week negative run, ahead of the release of the widely-watched Michigan consumer sentiment index. EU leaders continue their summit amid economic difficulties, Boris Johnson faces political woes in the U.K., and the crude market looks forward to next week’s OPEC+ meeting. Here’s what you need to know in financial markets on Friday, June 24.

1. Investors digest Powell’s comments; Michigan sentiment due

Investors will take this final day of the week to parse through Federal Reserve chairman Jerome Powell’s testimony to Congress, while studying the latest data on the state of the U.S. economy.

Powell made clear the central bank’s commitment to reining in soaring inflation, calling it “unconditional”, even acknowledging that the sharply higher interest rates needed to do so may push up unemployment and increase the risks of a recession.

Economic data due Friday includes new home sales for May, at 10:00 AM ET (1400 GMT), which is expected to show a slight slowdown, and the Michigan consumer sentiment index for June.

Analysts expect the June Michigan number to be 50.2, which would be in line with the previous month. Earlier in the day, the German Ifo business sentiment index dropped in May as rising energy prices and the threat of gas shortages unsettled businesses in Europe’s largest economy, and U.K. consumer confidence dropped to a record low.

2. EU summit continues

The European Union leaders continue their summit Friday, a day after they took the historic decision to grant Ukraine, as well as Moldova, candidate status on the path to membership of the bloc.

With that potentially thorny issue out of the way, the conversation is likely to turn more towards the economic situation the bloc finds itself in, with inflation soaring and the likelihood of a recession rising.

Comments from Luis de Guindos, Vice-President of the ECB, at 09:30 AM ET (1330 GMT), will be carefully studied after the policymakers at the central bank paved the way for an interest rate hike next month.

A poll by Reuters showed all but two of the 55 economists expected the ECB to deliver a quarter-point raise on July 21 to -0.25%, and 50 of 55 expected it to hike its policy rate by 50 basis points in September, taking the deposit rate out of negative territory to 0.25%.

3. Stocks set to open higher; FedEx Impresses 

U.S. stock markets are set to open higher Friday, set to record a rare positive week during these turbulent times.

By 06:00 AM ET (1000 GMT), Dow Jones futures were up 215 points, or 0.7%, while S&P 500 futures were up 0.8% and Nasdaq 100 futures were up 1%. 

All three cash indices are on course to snap three-week losing streaks, with the blue-chip Dow Jones Industrial Average up 2.6% so far this week, the broad-based S&P 500 3.3% higher and the Nasdaq Composite up 4%.

Stocks likely to be in focus include FedEx (NYSE:FDX), after the transport company, widely regarded as a bellwether of the online shopping and remote economy in general, impressed with its quarterly earnings after the close Thursday. Carnival (NYSE:CCL) will also report its latest quarterly earnings, amid signs summer travel is picking up. 

4. Johnson’s leadership in question after U.K. by-election defeats

The problems facing British Prime Minister Boris Johnson are mounting, with his Conservative Party losing two by-elections overnight as voters turned against his party, including a swing of nearly 30% in a previously safe seat in southeast England.

The results prompted Conservative Party co-chairman Oliver Dowden to resign from the role with immediate effect, stating that “someone must take responsibility”, a line which could be seen as a dig at Johnson’s leadership just a few weeks after he survived a vote of no confidence in the wake of the ‘Partygate’ scandal.

Johnson’s political success has been based on his popularity in his party’s heartlands, but these results indicate that may be waning as surging prices, a squeeze on incomes, and disruption from strikes take a toll on the national mood.

Additionally, U.K. retail sales volumes dropped by 0.5% in May, according to data from the Office for National Statistics. The decline was mainly due to slowing food store sales, which fell by 1.6% during the month, a sign that inflation concerns may be taking a bite out of consumer demand.

5. Oil set for weekly fall; OPEC+ meets next week

Crude oil prices rose with risk sentiment on the up Friday, but the market is heading for its first back-to-back weekly loss since early April on fears that aggressive monetary tightening will slow global growth, weighing on demand.

By 06:00 AM ET, U.S. crude futures were up 1.3% at $105.58 a barrel, while Brent crude was up 1.1% at $111.28 a barrel. Both benchmarks are on course for weekly losses of over 2%

Attention will quickly turn to the meeting of the Organization of Petroleum Exporting Countries and allies next week to discuss the group’s production levels.

The cartel, known as OPEC+, is widely expected to stick to its plan to boost output by 648,000 barrels a day in July and by the same amount in August, despite the plans of U.S. President Joe Biden to visit Saudi Arabia, the de facto leader of the group, to plead the case for lower crude prices.

Economy

Futures rise as easing China COVID curbs lift travel, leisure stocks

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© Reuters. A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 22, 2022. REUTERS/Brendan McDermid

By Shreyashi Sanyal

(Reuters) – Travel and leisure shares propped up U.S. stock index futures after China relaxed some COVID-19 quarantine requirements for international travelers, raising hopes of a revival in global growth.

Airlines, cruises, casinos and hotels were among the gainers in premarket trading after China’s slashing of the quarantine time for inbound travelers by half boosted hopes of a big jump in international travel and spending.

Shares of Walt Disney (NYSE:DIS) Inc rose 2.5% to top the list of gainers on the Dow Jones Industrial Average, after the company’s Shanghai Disney Resort said it would reopen the Disneyland theme park on June 30 after being shut for more than three months.

Spirit Airlines (NYSE:SAVE) and American Airlines (NASDAQ:AAL) Group Inc were the biggest gainers in the sector, rising 4% and 2% respectively.

Melco Resorts jumped 10% and led the rise in the casino sector, closely followed by Wynn Resorts (NASDAQ:WYNN), MGM Resorts (NYSE:MGM) International.

Wall Street’s main indexes started the week on soft footing after worries of surging inflation and an aggressive Federal Reserve dominated sentiment amid few market moving catalysts till the start of earnings season in two weeks.

Investors are now looking at data to determine whether the economy can withstand large interest rate hikes by the U.S. central bank to stamp out inflation.

A survey from the Conference Board is expected to show its consumer confidence index slipped to a reading of 100.4 in June, from 106.4 in May, at 10 a.m. ET.

The S&P 500 and the Nasdaq are set to post losses in June and are on course to log two straight quarterly declines for the first time since 2015.

At 6:49 a.m. ET, Dow e-minis were up 175 points, or 0.56%, S&P 500 e-minis were up 20 points, or 0.51%, and Nasdaq 100 e-minis were up 52.25 points, or 0.43%.

Nike Inc (NYSE:NKE) shed 2.8% as it forecast first-quarter revenue below estimates on expectations of more discounts and pandemic-related disruptions in China, its most profitable market.

Occidental Petroleum Corp (NYSE:OXY) climbed 3.1% after top investor Warren Buffett raised stake in the shale producer.

China ADRs also rose on Beijing easing its COVID curbs, with e-commerce firms Alibaba (NYSE:BABA).com, JD (NASDAQ:JD).com and Pinduoduo (NASDAQ:PDD) up between 1.2% and 1.4%

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Economy

Euro below $1.06 as Lagarde keeps July policy options open

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© Reuters. A shopper pays with a ten Euro bank note at a local market in Nice, France, June 7, 2022. REUTERS/Eric Gaillard

By Saikat Chatterjee

LONDON (Reuters) – The Aussie and the Canadian dollar climbed on Tuesday on firmer oil prices while the euro held below $1.06 as European Central Bank (ECB) President Christine Lagarde offered no fresh insight on the central bank’s policy outlook.

The ECB is widely expected to follow its global peers by raising interest rates in July to check soaring inflation though economists are divided on the magnitude of the rate hike to protect a struggling economic recovery due to high oil prices.

Oil prices are up 10% in barely a week on supply constraint concerns with Brent crude holding above $117, pushing the Canadian dollar and the Australian dollar up 0.3% and 0.4% respectively. [O/R]

“Oil is helping the Norwegian crown and the Canadian dollar to outperform and the euro is again running into resistance at the 1.06 level,” said Kenneth Broux, an FX strategist at Societe Generale (OTC:SCGLY) in London.

The euro held below $1.06 after the ECB’s Lagarde said the central bank would move gradually but with the option to act decisively on any deterioration in medium-term inflation, especially if there were signs of a de-anchoring of inflation expectations.

Money markets are pricing in about 238 basis points (bps) of cumulative rate hikes by mid-2023 compared to around 280 bps two weeks ago.

Broader currency market moves were contained in a big week for markets in economic data terms. German inflation figures are due on Wednesday, French data on Thursday and euro zone numbers on Friday.

At the other end of the dial, higher oil prices caused the partially convertible Indian rupee to open at a record low, and fall further to 78.67 per dollar.

The U.S. dollar index struck a two-decade high of 105.79 this month and was last steady at 103.93.

Elsewhere, the offshore Chinese yuan moved higher after China reduced COVID quarantine for international travellers.

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Economy

China’s economy recovering but foundation not solid, premier says

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© Reuters. FILE PHOTO: Chinese Premier Li Keqiang is seen on a screen as he attends a news conference via video link after the closing session of the National People’s Congress (NPC) in Beijing, China March 11, 2022. REUTERS/Ryan Woo

BEIJING (Reuters) -China’s economy has recovered to some extent, but its foundation is not solid, state media on Tuesday quoted Premier Li Keqiang as saying.

China will strive to drive the economy back onto a normal track and bring down the jobless rate as soon as possible, Li was quoted as saying.

“Currently, the implementation of the policy package to stabilise the economy is accelerating and taking effect. The economy has recovered on the whole, but the foundation is not yet solid,” Li was quoted as saying.

“The task of stabilising employment remains arduous.”

China’s economy showed signs of recovery in May after slumping the previous month as industrial production revived, but consumption remained weak and underlined the challenge for policymakers amid the persistent drag from strict COVID-19 curbs.

China’s nationwide survey-based jobless rate fell to 5.9% in May from 6.1% in April, still above the government’s 2022 target of below 5.5%.

In particular, the surveyed jobless rate in 31 major cities picked up to 6.9%, the highest on record. Some economists expect employment to worsen before it gets better, with a record number of graduates entering the workforce in summer.

Li vowed to achieve reasonable economic growth in the second quarter, although some private-sector economists expect the economy to shrink in the April-June quarter from a year earlier, compared with the first quarter’s 4.8% growth.

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