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U.S. Data Dump, Germany's New Government, Oil Stockpiles - What's Moving Markets

EconomyNov 24, 2021 13:02
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By Geoffrey Smith -- There's a veritable feast of U.S. economic data, including personal consumer expenditure prices - the Federal Reserve's favored gauge of inflation - and weekly jobless claims, moved up a day to avoid the Thanksgiving Holiday.  Germany will present its new government under the leadership of center-left politician Olaf Scholz, who was finance minister under Angela Merkel in the last government. Stocks are set to open lower, as fears of inflation and monetary tightening continue to bubble alongside concerns about supply chain disruptions. Walgreens and CVS get dragged into the opioid legal quagmire with an important verdict in Ohio, and oil prices correct downwards after Tuesday's surge. Here's what you need to know in financial markets on Wednesday, 24th November.

1. Pre-Thanksgiving data dump

Gear up for tomorrow’s guzzle-fest by gorging on a vast spread of U.S. economic data, which will likely inform the Federal Reserve’s next deliberations on whether or not to speed up the phase-out of its bond purchases.

The aperitif is weekly data on the mortgage market at 7 AM ET (1200 GMT), with a main course of revised third-quarter GDP data. You can choose from a selection of side dishes including weekly jobless claims, October durable goods orders and the October goods trade balance.

Make sure you leave a little intellectual space for dessert though – the core personal consumer expenditures index for October is due at 10 AM ET, along with personal income and spending data.  Coffee, digestifs nuts and cigars will be served with the minutes of the last Fed meeting at 2 PM ET.

2. Germany set to present new government

Germany will show off its first three-way coalition government in over 50 years at a press conference at 9 AM ET.  It will confirm Olaf Scholz, a centrist from the center-left Social Democratic Party, as Chancellor and is likely to give the Finance Ministry to Christian Lindner of the pro-business and somewhat euroskeptic Free Democrats. The third party in the coalition are the Greens.

Given that the FDP and Greens are at opposing ends of the debate around issues such as climate change and taxation, the coalition will have to work harder than the ones dominated by Angela Merkel’s Christian Democrats to stay coherent.

The new coalition takes power against a rapidly worsening health backdrop: the 7-day infection rate for Covid-19 is running at over twice last winter’s peak. The expectations subindex of the Ifo institute’s business confidence index dipped accordingly in November.

3. Stocks set to open lower on inflation, retail jitters

U.S. stock markets are set to open lower later, under ongoing pressure from a bond market that is looking increasingly jittery as the Fed starts to wind down its asset purchases.

By 6:15 AM ET, Dow Jones futures were down 170 points, or 0.5%, while S&P 500 futures were down 0.4%, as were Nasdaq 100 futures. The Nasdaq had underperformed against a backdrop of renewed selling of Tesla (NASDAQ:TSLA) stock by CEO Elon Musk, while warnings of supply chain problems and possible inventory shortages had spooked retailers such as Best Buy (NYSE:BBY), Gap (NYSE:GPS), Urban Outfitters (NASDAQ:URBN) and Abercrombie & Fitch (NYSE:ANF).

Gap in particular is likely to open under pressure after missing earnings estimates badly after the bell on Tuesday. In today’s earnings, Deere & Co 's (NYSE:DE) numbers and outlook will be scrutinized for the impact of labor disputes – a phenomenon that may well broaden across the economy in the coming months.

4. Pharmacies dragged into opioid quagmire

A federal jury found Walgreens, CVS and Walmart (NYSE:WMT) complicit in the spread of the opioid epidemic in what may prove to be a significant new development, as affected families and public authorities seek redress.

The jury ruled that the three were liable for around $2 billion in damages sustained by Lake and Trumbull Counties in Ohio, under public-nuisance legislation.

It’s not clear that this will automatically create a precedent that will decide any similar suits in future, not least since public-nuisance legislation varies from state to state. The case was, however, one of a number of so-called ‘bellwether’ cases which may serve as guidance for claims elsewhere.

5. Oil corrects lower after API data

Crude oil prices are correcting after a short-term surge on Tuesday in response to the coordinated announcement of reserve releases by the world’s biggest importers.

While the volumes involved don’t appear enough to signal a real change in the current supply-demand balance, the political signalling effect of a coalition spanning the U.S., India and China – rivals in every other sphere – was perhaps stronger than at first appreciated.

In addition, data from the American Petroleum Institute showed a surprise increase of 2.3 million barrels in U.S. crude inventories last week. The government’s data are due at 10:30 AM ET, as usual.

By 6:25 AM ET, U.S. crude futures were down 0.4% at $78.19 a barrel, while Brent crude futures were down 0.5% at $81.88 a  barrel.

U.S. Data Dump, Germany's New Government, Oil Stockpiles - What's Moving Markets

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