By Geoffrey Smith and Ana Beatriz Bartolo
Investing.com – The global market rally faces a familiar pattern of new sales due to recession fears. Fed Chair Jerome Powell heads to Capitol Hill for two days of testimony. President Joe Biden is expected to call for a suspension of the federal gas tax. On the other side of the Atlantic, inflation in the UK hits a new record and the International Energy Agency (IEA) warns of a complete cut of Russian gas to Europe.
In Brazil, the government is articulating to have more power over Petrobras (SA:).
Here’s what you need to know in the financial markets on Wednesday, June 22nd.
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1. Global market recovery fades
The global rally in equity markets quickly met a familiar pattern of new selling as recession fears once again took the lead.
Asian and European stocks sank overnight and bonds rallied, with European markets underperforming as the International Energy Agency warned regional leaders to prepare for a complete cutoff of Russian gas supplies.
At 8:04 am, the was down 2.74%, while the 2-year note was down 2.80%.
Weakening risk appetite was also evident in cryptocurrencies, in which the market dropped 4.0% to $20,441.
US equity markets are likely to miss most of their gains from Tuesday at the open later, awaiting any sign that the economic trajectory will end with the Fed’s policy of tightening less than currently expected.
At 8:06 am, 100 futures were down 1.61%, while A and A were down 1.37% and 1.14%, respectively. The , ETF that measures the performance of Brazilian stocks on Wall Street, retreated 0.5% premarket on Wall Street, while ADRs of Petrobras (NYSE:) fell 1.47% at US$ 11.38 and those of Vale (NYSE:) retracting 2.31% to $14.38.
Stocks likely to be in focus later on include Altria (NYSE:) (SA:), after the Biden administration published a plan that would force tobacco companies to remove most nicotine from cigarettes, weakening their addictive tendencies. It will also be of interest to Toyota (NYSE:) (SA:), which signaled attempts to ramp up production through September despite ongoing problems with supply chains.
CHECK: Real-time US stock quote in premarket on Wall Street
2. Powell in Congress
Federal Reserve Chair Jerome Powell will begin two days of testimony to Congress on the state of the economy, addressing the Senate Banking Committee starting at 9:30 am.
He will likely be asked about the choice between reducing inflation and the risk of pushing the US into recession (analysts at the Citigroup (NYSE:) raised its recession risk estimate to 50% on Tuesday).
Powell’s recent meeting with President Joe Biden seemed to leave him with all the leeway needed to bring inflation down from its 4-decade peak. However, congressmen who will be reelected in five months may be less generous.
Signs that the US economy is starting to cool are already multiplying, with existing home sales falling for the fourth straight month in May, as interest rate hikes hit affordability metrics. MBA data on mortgage applications must be delivered by 8:00 am.
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3. Change in the law of state-owned companies
The political wing of the Bolsonaro government is preparing a Provisional Measure to amend the State-Owned Companies Law, created in 2016. The objective is to create some mechanism that allows interference in the Petrobras price adjustment model.
This MP would make it possible for the government to change the management of the state-owned company without the need to guarantee a professional command for the company, that is, this would allow purely political indications to be made to the company’s leadership.
The Minister of Economy, Paulo Guedes, is trying to stop the advance of this type of discussion by releasing proposals such as the truck driver grant and the gas voucher for the low-income population.
4. UK consumer inflation hits new record as rail strikes continue
The price climbed to another 4-decade high of 9.1% in May as food and energy prices continued to take big bites of consumers’ disposable income. Consequently, core inflation was below expectations as spending on non-essential items was reduced.
Pipeline pressure in the system remains high, with factory gate prices rising 15.7% on the year and another 1.6% on the month. Developments are not being helped by the sustained weakness in , which dipped to $1.2176 before paring losses.
The UK is in the midst of a three-day national rail strike, which could set an important precedent for this year’s round of public sector pay increases. A regional chapter of the RMT machinists union agreed in principle to accept an offer of a 7.1% salary increase.
Separately, a new study has found that Brexit has left the UK economy less open and competitive than before.
CHECK: Quotation of the main exchange rates
5. Crude Oil Falling Due to Recession Fears
Crude prices fell as fears of a global recession clouded demand prospects. Reports of a Covid-19 outbreak in Macau’s Chinese gambling center did nothing to improve the mood.
As of 8:11 am, U.S. crude oil futures were down 4.36% to $104.75 a barrel, while oil futures were down 3.82% to $110.20.
U.S. President Joe Biden is expected to ask Congress later to vote to suspend the federal gasoline tax and rally support for other measures that will lower U.S. prices to sustain demand, but he is not yet ready. clear how this can push global prices down.
CHECK: Quotation of the main global commodities
will release its weekly inventory data at 5:30pm, a day later than normal due to the Monday holiday.