Eurozone, Germany, France, UK Flash PMI; ECB Economic Bulletin;
France Business Sentiment Index; UK Public Sector Finances, CBI
Distributive Trades Survey; EU New Commercial Vehicle
Registrations; updates from Wacker Chemie, Siemens, Bunzl, Serco,
Europe faces another negative opening session as investors
continue to consider the likelihood of a recession following
Powell's latest comments. In Asia, shares were broadly higher; the
dollar, Treasury yields and gold edged lower; while oil and base
metals extended their recent slide.
European shares face further losses on Thursday after Jerome
Powell acknowledged that the Federal Reserve's rate-raising
campaign could cause an economic downturn.
On Wall Street, stocks couldn't hold on to gains, as investors
weighed Powell's renewed vow on inflation and even after he told
lawmakers that a slower pace of interest rate hikes is
Whatever positives came out of Powell's testimony, "it likely
won't bring enough buyers into the market to push us significantly
higher," wrote Shawn Cruz, head trading strategist at TD
Across his comments Wednesday, Powell said repeatedly the Fed is
not trying to cause a recession but one can't be ruled out as
officials confront a very challenging landscape. He noted "I don't
see the likelihood of a recession as particularly elevated right
now," while adding "you should know that no one is very good at
forecasting recession very far out."
Meanwhile, the market consensus remains around another steep
rate hike next month.
Powell's "continued emphasis on the need for 'compelling'
evidence that inflation is falling suggests officials will repeat
last week's larger 75bp hike at the next FOMC meeting," said
Capital Economics' Michael Pearce.
Read: Fed's Harker Says Some Economic Contraction Possible
Stocks to Watch:
Smurfit Kappa's earnings strength could boost its shares, said
Jefferies, upgrading its recommendation on the paper and packaging
company to buy from hold.
While investors are wary about how macro uncertainty might
affect short-term demand and pricing, Jefferies said Smurfit has
attractions for longer-term investors looking for exposure to
companies aiming to benefit from e-commerce and increased
"We expect Smurfit to demonstrate earnings resilience this
cycle, justifying a re-rating versus history."
Still, Jefferies cut its price target on Smurfit's London-listed
stock to 3700p from 3900p, citing wider macro-economic and
Russia's attack on at least two grain storage facilities in
Ukraine has traders doubting that Black Sea ports will reopen for
shipments anytime soon.
"Bunge and Viterra report extensive damage to terminals in
Mykolayiv along the Black Sea Coast, which provides further
evidence that Ukrainian grain will not be shipped via the Black Sea
indefinitely," said AgResource.
"War in Ukraine rages on, particularly in the east, and odds
remain near zero that any humanitarian export corridor will be
created this summer."
In an interview with the WSJ this week, MHP SE executive
chairman Dr. John Rich said that depleted grain storage capacity in
Ukraine may further hamper crop growth there next year.
The dollar remained under pressure in Asia in further reaction
to Powell's comments about fighting inflation.
Evercore ISI analysts said Powell was a bit less hawkish than
"There is no new language here and the most powerful phrase that
he has used recently, including in the Monetary Policy Report
submitted to Congress--the Fed's "unconditional" commitment to
restoring price stability--was left out of the prepared
Capital Economics said falling inflation won't stop central
banks tightening the screws. It thinks inflation still seems set to
fall, albeit from a higher level than envisaged before the war in
"The global economy is on course for weaker growth, high
inflation, and tighter monetary conditions. The world's largest
economies will all suffer for different reasons...higher interest
rates will weigh on interest-rate-sensitive spending in the
CapEcon expects higher bond yields, a strong dollar and some
further drop in equities, with the "worsening risk environment as
well as aggressive tightening by the Fed to result in further
Treasurys steadied in Asia after the yield on the 10-year note
saw its biggest fall in 7 months on Wednesday following Powell's
"Bond market volatility remains intense, with inflation worries
and growth fears driving confusion among investors," said Mark
Hackett, chief of investment research at Nationwide.
"There is similar confusion in inflation expectations, with the
5-year break-even inflation rate dropping from 3.6% in March to
2.8% currently, as growth concerns begin to outweigh
Oil prices continued to slide in Asia, last down almost 3%, on
heightened demand worries as recession expectations rise.
While commodity indexes have been "super weak for a while," oil
has been a bit of an outlier on the lower supply and higher demand
outlook, said SPI Asset Management's Stephen Innes.
"But I think it's a fallacy to think oil could stay this
elevated given the amount of central bank-induced slowdown likely
to be seen later in the year."
The Fed and other inflation-fighting central banks want lower
commodities, which is what they are explicitly trying to engineer,
The API reported inventories of crude oil in the U.S.
unexpectedly rose by 5.6 million barrels in the latest week, a
source citing the data said, while gasoline supplies rose by 1.2
The results, bearish for crude, were released ahead of official
inventory data from the EIA originally set for release Thursday,
but delayed indefinitely due to "systems" problems at the EIA.
Average forecasts in a WSJ survey indicate the EIA report will
show crude inventories fell by 1.2 million barrels from the
previous week and that gasoline supplies decreased by 800,000
Gold futures were lower for a fourth straight session, although
safe haven buying as recession fears grow may offer bullion some
"The threat of an economic downturn is likely to provide a floor
to gold prices, despite central banks aggressively hiking rates to
tame inflation," said ANZ analysts.
OANDA puts resistance at $1860 and support at $1805, with senior
market analyst Jeffrey Halley saying: "I would need to see a couple
of daily closes above $1900 to get excited about a reinvigorated
Copper prices continued to fall after hitting a 16-month low on
Wednesday, unable to escape the broader risk-off move across
markets. The three-month contract fell 2% in Asia, taking one-month
losses to 10%.
However, ING's Warren Patterson said that "while the macro
picture is a concern for metals, micro developments for some metals
continue to point towards a tight market," which could limit
Chinese iron ore futures dropped almost 5% as the country's
steel production slows and inventories build.
"The lack of growth in economic activity has seen steel demand
suffer. The market has lost confidence that Beijing will be able to
support the economy," said ANZ analysts.
Also, several blast furnaces globally have begun planned
maintenance, causing molten iron ore production, and hence iron ore
demand, to decline, said ING's Patterson.
TODAY'S TOP HEADLINES
Fed Chair Jerome Powell Says Higher Interest Rates Could Cause a
Federal Reserve Chairman Jerome Powell said the central bank's
battle against inflation could lead it to raise interest rates high
enough to cause a recession, offering his most explicit warning
"It's not our intended outcome at all, but it's certainly a
possibility, " Mr. Powell said Wednesday during the first of two
days of congressional hearings. "We are not trying to provoke and
do not think we will need to provoke a recession, but we do think
it's absolutely essential" to bring down inflation, which is
running at a 40-year high.
Congress Unlikely to Heed Biden's Call for Three-Month
Suspension of Gas Tax
President Biden called for a three-month suspension of federal
gasoline and diesel taxes-a move that is unlikely to have the
support needed to pass in Congress and one economists and business
leaders say would do little to address record-high gas prices.
"I fully understand that the gas tax holiday alone is not going
to fix the problem, but it will provide families some immediate
relief," Mr. Biden said at the White House on Wednesday. "Just a
little bit of breathing room."
China Approves Plan to Develop Fintech Sector Regulations
Chinese President Xi Jinping approved a plan to standardize and
develop regulations for the payments and financial technology
sector in a high-level meeting, signaling that a regulatory
crackdown on the sector might be easing.
The core function of fintech platform companies should serve the
real economy and authorities will enhance the supervision of
payment firms and their financial activities, according to a
Wednesday meeting of the Central Commission for Comprehensively
Deepening Reform chaired by Mr. Xi, state media Xinhua
Crypto Broker Voyager Digital Says Three Arrows Capital Hasn't
Repaid $666 Million in Loans
Crypto broker Voyager Digital Ltd. said it may issue a notice of
default to Three Arrows Capital Ltd. if the crypto hedge fund fails
to make a loan repayment by June 27.
Voyager Digital said it lent 15,250 bitcoin and $350 million in
USD Coin to Three Arrows Capital. The company initially asked for a
repayment of $25 million USD Coin by June 24 and then asked for the
entire balance to be paid by June 27. These loans amount to $666
million based on bitcoin's current price. Neither of these loans
has been repaid, it said.
Russia Hits Grain Terminals in Latest Attack on Ukraine's Food
Rolls-Royce Offers $2,500 Payment to Workers as Inflation
LONDON-Rolls-Royce Holdings PLC is offering U.K. staff a
one-time payment of GBP2,000, equivalent to about $2,450, hoping
the bonus will help ease pressure from union officials and
employees over rising inflation while keeping a lid on the
jet-engine maker's costs ahead of an uncertain economic future.
The move is one of many approaches companies are taking to
address soaring inflation that has unions and workers in many parts
of the world demanding higher pay. For months, private companies
have been boosting salaries and wages and offering signing or
retention bonuses, amid exploding post-lockdown demand and
super-tight labor markets. More recently, surging prices for items
from food to fuel have weighed on workers' buying power, pressuring
employers to boost pay to make up the shortfall.
Farmers Stick With Bayer's Roundup, Undeterred by Supreme Court
The U.S. Supreme Court this week denied an effort by Bayer AG to
stem thousands of lawsuits alleging its Roundup weedkiller caused
cancer among landscapers and residential gardeners. On Alan
Meadows's Tennessee farm, it was business as usual.
As the top U.S. court declined Tuesday to hear Bayer's appeal of
a 2018 jury verdict linking the company's herbicide to non-Hodgkin
lymphoma in a California plaintiff, Mr. Meadows said he was
spraying the chemical on his own 4,000-acre farm, which he said he
has done since the 1990s.
U.K. Regulator Fines JLT Specialty $9.7 Million for Bribery
The U.K.'s Financial Conduct Authority said Wednesday that it
fined insurance broker JLT Specialty Ltd. about GBP7.9 million,
equivalent to about $9.7 million, for alleged financial crimes
U.K.-based JLT Specialty is now part of New York-based
professional-services firm Marsh & McLennan Cos., which
acquired its parent company, Jardine Lloyd Thompson Group PLC, in
U.S. Gains in Push for Exception to EU Sanctions on Russian
A U.S. push to pare back one of the European Union's sanctions
on Russian oil has tentatively started to gain traction within the
27-member bloc, with officials weighing whether to allow insurers
to cover shipments of Russian oil if the price the oil will sell
for falls under a cap.
After weeks of infighting, the EU in early June approved a ban
on insuring shipments of Russian oil alongside a ban on imports of
Russian oil that is set to go into effect this later year. Because
many shipments of Russian oil are insured in the EU and U.K.,
Treasury Secretary Janet Yellen has repeatedly said she is
concerned that the EU's plans could take Russian oil off the global
market and further drive up prices.
France's Emmanuel Macron Calls for Compromise After Losing
Majority in Parliament
PARIS-French President Emmanuel Macron said Wednesday he was
ready to work with other parties to form a new coalition, after
losing his majority in the French Parliament in elections this
The French leader said he was open to building an alliance with
other political parties to form a new parliamentary majority. His
party could also strike agreements with other political parties on
Polio Virus Found in London Sewage Puts U.K. on High Alert
Polio has been detected in London's wastewater system, U.K.
health authorities said, putting clinics on high alert for an
infectious disease that hasn't been recorded in Britain for nearly
The U.K. Health Security Agency raised the alarm on Wednesday
after it found several closely related polioviruses in sewage
samples taken from a treatment facility in east London between
February and May. That pattern of detection suggests that a form of
the virus has been spreading locally, the agency said.
European Parliament Backs Broader Carbon Border Tax
The European Parliament approved legislation to tax imports
based on the greenhouse gases emitted to make them, a plan that is
sending shudders through the global trading system.
The legislation backed by the parliament on Wednesday broadens a
previous proposal for the tariff to include some chemical makers.
It also sets a faster timeline for implementation than the earlier
proposal, which was drafted by the European Commission, the
European Union's executive arm.
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Expected Major Events for Thursday
06:00/UK: May Public sector finances
06:00/NOR: Apr Labour force survey SA, incl unemployment
06:00/EU: May New Commercial Vehicle Registrations in Europe
statistics (EU27 + EFTA3)
06:00/SWE: May PPI
06:45/FRA: Jun Monthly business survey (goods-producing
07:00/HUN: May Employment & unemployment
07:15/FRA: Jun France Flash PMI
07:30/GER: Jun Germany Flash PMI
08:00/NOR: Norges Bank monetary policy decision and presentation
of Monetary Policy Report
08:00/EU: Jun Eurozone Flash PMI
08:00/ICE: May Labour Force Survey
08:30/UK: Jun Flash UK PMI
10:00/UK: Jun CBI Distributive Trades Survey
11:00/TUR: Turkish interest rate decision
12:00/POL: May Broad money M3
14:00/DEN: May Central Government Finance & Debt
23:01/UK: Jun UK Consumer Confidence Survey
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(END) Dow Jones Newswires
June 23, 2022 00:30 ET (04:30 GMT)
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