Here are five things you need to know for Monday, August 29:
1. — Stock futures extend slide after Powell’s inflation reality check
U.S. stock futures extended their decline on Monday as Treasury bond yields soared and the dollar tested multi-decade highs against its global peers amid rhetoric on the inflation from Federal Reserve Chairman Jerome Powell was rippling through global markets.
Powell’s speech Friday at the central bank’s Jackson Hole symposium warned of the “pain” needed to rein in the fastest inflation in over forty years, and signaled further rate hikes – and possibly – be larger – to come by the end of December.
“Restoring price stability will take time and will require using our tools forcefully to balance supply and demand,” Powell said. “Reducing inflation will likely require an extended period of below-trend growth.”
The reality of Powell’s inflation pushed U.S. stocks into one of their worst one-day declines of the year on Friday, snuffing out a strong six-week rally that had been predicted on bets for a higher rate path. easy from the Fed.
Those bets were largely erased in the wake of Powell’s speech, however, as yields on interest-rate-sensitive 2-year Treasury bills climbed to 3.47% in overnight trading, the most high since 2007, while the US dollar index gained 0.52% against a basket of its global peers to trade at 109.372 and just a hair’s breadth from the highest levels since 2002.
CME Group’s FedWatch, meanwhile, puts a 68% chance of a 75 basis point rate hike from the Fed at its next policy meeting in September, up from just 55% a year ago. week and only 28% at the beginning of the month. .
Central banks around the world, except the People’s Bank of China, are also echoing Powell’s hawkish stance, with the European Central Bank’s Francois Villeroy de Galhau calling for a “significant” rate hike in September even as that the region’s economy is flirting with a threatening energy crisis and potential for recession.
Recession in Britain is also a growing risk, according to economists at Goldman Sachs, who have called for a contraction to start in the last three months of the year and extend through most of 2023 amid a spike in home energy costs that will hammer discretionary spending and could lead to a consumer debt crisis.
The gloomy backdrop for equities heading into the final trading week of August has markets pulling back, with Europe’s Stoxx 600 down 0.94% at the start of Frankfurt trading, after falling 1.85% for the MSCI ex-Japan index in Asia and a drop of 2.66% for the Nikkei 225 in Tokyo.
On Wall Street, futures tied to the S&P 500 point to a drop from the opening bell of 39 points, while those tied to the Dow Jones Industrial Average are priced for a downside move of 270 points. Futures linked to the technology-focused Nasdaq point to a decline of 163 points.
2. — Week Ahead: Jobs data take center stage as September headwind looms
Friday’s August jobs report highlights a quiet week for earnings and data releases ahead of the Labor Day long weekend and the start of the market’s historically toughest month.
The labor market was the best performing sector of the economy this summer, with 528,000 new jobs added in July, pushing the overall unemployment rate to a nearly five-decade low of 3.5%.
However, that rate of growth is expected to slow sharply in August, with forecasters looking for a total of 285,000 new jobs added to the world’s largest economy. Wages, however, are expected to rise as more than 11 million vacancies remain unfilled, which could test market complacency amid easing consumer price pressures. Economists expect the average hourly wage to rise 5.3% from a year ago and 0.4% from July.
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Beyond the jobs, investors will receive updates on the mortgage market with the MBA’s weekly assessment on Wednesday, with a key eurozone inflation reading scheduled for the same day.
On the earnings front, Best Buy (BBY) HP (HPQ) Hewlett Packard Enterprises (HPE) and Broadcom (AVGO) are all due to report this week, while Bed Bath & Beyond (BBBY) is expected to unveil its much-anticipated turnaround plans ahead of Friday’s jobs data.
3. — Oil prices prolong gains on supply issues
Global oil prices surged on Monday, rising amid both a soaring U.S. dollar and fading growth prospects in the world’s biggest economies, amid lingering concerns over production cuts of OPEC.
Saudi Arabia, the cartel’s most influential member, has hinted at production cuts amid what its energy minister called “chaotic” global markets and the looming supply of Iranian crude, which could affect the markets in the coming months if talks between the United States, the EU and Tehran on the future of its nuclear program continue to advance.
Deadly unrest over the weekend in Libya, a key OPEC supply state, added to concerns about near-term disruptions that could keep prices high.
WTI crude futures for October delivery rose 56 cents to $93.62 a barrel, while Brent contracts for the same month, the global price benchmark, added 28 cents for trading at $101.27 a barrel.
4. — Bitcoin crashes below $20,000
Bitcoin prices fell below $20,000 on Monday after the dollar rallied on Friday and Treasury bond yields rose, following Fed Chairman Jerome Powell’s hawkish speech in Jackson Hole.
Powell’s speech, which boosted the odds of another 75 basis point hike in the benchmark federal funds rate next month, propelled the dollar a touching distance from its recent two-decade highs in equity markets. changes over the weekend, putting downward pressure on assets such as gold and digital coins, which do not pay interest to their investors.
Further pressure related to reports that creditors in debt following the 2014 collapse of crypto exchange Mt. Gox will begin receiving payments from administrators in Japan, a move that could see 137,000 new bitcoins added to the market. – and possibly sold – over the next few weeks.
Bitcoin prices were last seen rising 1.59% in Monday’s session at 19,881.70 each.
5. — Artemis I is ‘Go For Launch’
NASA will begin its first moon-centric rocket launch in more than fifty years on Monday with the launch of Artemis I, a mission comprised of the administration’s Next Generation Space Launch System and an unmanned Orion capsule.
The Artemis I mission will launch from Kennedy Space Center in Cape Canaveral, Fla., at 8:33 a.m. Eastern Time, departing for a test flight that will take the combined spacecraft around the moon, and back to earth, over the next six weeks.
The $37 billion program, which has been running for more than a decade, aims to bring American astronauts back to the lunar surface for the first time since Gene Cernan, the twelfth and last man to walk on the moon, in December 1972 .
“It’s a great turning point in history, because we are going back to the moon after 50 years, to stay there, to learn how to work, to create, to develop new technologies and new systems and new spacecraft in order to go to Mars,” NASA Administrator Bill Nelson said.