Powell in Congress, Recession Fears, API Inventories

© Reuters

By Geoffrey Smith

Investing.com — The global market rally is hitting a familiar pattern of new sales amid fears of a recession. Fed Chair Jerome Powell heads to Capitol Hill for two days of testimony. President Joe Biden is expected to call for the suspension of the federal gasoline tax. Further afield, UK inflation is hitting a new high and the IEA is warning of a total cut off of Russian gas to Europe. Here’s what you need to know in the financial markets on Wednesday, June 22.

1. Global market rally is fading

The global rally in equity markets soon encountered a familiar pattern of new sales as recession fears once again took over.

Asian and European stocks fell overnight and bonds rose, with European markets underperforming as the International Energy Agency warned regional leaders to prepare for a total shutdown of Russia’s gas supply.

At 6:15 a.m. ET (1015 GMT), the US Treasury yield fell 8 basis points to 3.22%, while the note fell 7 basis points to 3.13%.

Declining risk appetite was also evident in cryptocurrencies, where 4.0% fell to $20,441.

2. Powell in Congress; mortgage details due

The Federal Reserve chairman will begin two days of testimony to Congress on the state of the economy, addressing the Senate Banking Committee beginning at 8:30 a.m. ET.

He’s likely to be annoyed at the tradeoffs between curbing inflation and the risk of the US slipping into recession (Citigroup analysts raised their estimate of recession risk to 50% on Tuesday).

Powell’s recent meeting with President Joe Biden seemed to give him all the leeway needed to bring inflation back from its four-decade high. Congressmen and women reelected in five months may be less generous.

Signs that the US economy is beginning to cool are already mounting, with a decline for the fourth straight month in May as rising interest rates hit the affordability metrics. MBA details on are expected at 7:00 a.m. ET.

3. Stocks set to open lower

US stock markets will give up most of Tuesday’s gains on opening, pending any sign from Powell that the economic trajectory will end with the Fed’s tightening policy less than currently expected.

By 6:15 a.m. ET, they were down 361 points, or 1.2%, as they fell 1.4% and fell 1.7%.

Stocks likely to enter the picture later include Altria (NYSE:), after the Biden administration published a plan that would force tobacco companies to remove most of the nicotine from cigarettes, weakening their habit-forming tendencies. Also interesting will be Toyota, which marked efforts to increase production through September, despite ongoing supply chain problems.

4. UK CPI Hits New High As Rail Strikes Continue

in the UK soared to a new 4-decade high in May, as food and energy prices continued to take a significant bite out of consumer disposable income. accordingly fell short of expectations as spending on non-essentials was reduced.

Pipeline pressure in the system remains high, with a 15.7% year-on-year increase and month-on-month increase. Developments are not helped by continued weakness in , which fell to $1.2176 before the losses were wiped out.

The UK is in the midst of a three-day national rail strike, one that could set an important precedent for this year’s round of public sector pay increases. A regional branch of the train drivers’ union RMT has agreed in principle to an offer of a wage increase of 7.1%.

Separately, a new study found that Brexit had left the UK economy more than before.

5. Oil lower as recession fears bite; Biden gas tax objection likely seen

Crude oil prices continued to spiral as fears of a global recession clouded the demand outlook. Reports of a COVID-19 outbreak in Macau’s Chinese gambling hub did nothing to lift the mood.

At 6:30 a.m. ET, prices had fallen 4.7% to $104.71 a barrel, while falling 4.2% to $109.84.

US President Joe Biden is expected to later call on Congress to vote to suspend the federal gasoline tax and rally support for other measures that will lower prices across the US. Since the measures are aimed at supporting demand, it is not clear that they will ultimately exert downward pressure on world prices.

It reports its weekly stock data at 4:30 p.m. ET, a day later than usual due to Monday’s holiday.

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