Powell raises the dollar, Russia’s ambitions and China’s oil demand

© Reuters

By Geoffrey Smith

Investing.com — Risk aversion sentiment permeates global markets as Jerome Powell nails a 50 basis point rate hike in May. The dollar is surging against the pound and the yuan, in particular, as bets on higher rates intensify. Oil prices are falling due to growing fears over the impact of China’s Zero-COVID policy on domestic demand. Russia signals its intention to completely dismember Ukraine. Gap stock tumbles after a profit warning and AB InBev is also struggling after confirming a $1 billion hit following the exit of its Russia business. Verizon, Amex and Schlumberger top the list of quarterly reports due. Here’s what you need to know in financial markets on Friday, April 22.

1. Dollar, bond yields rise after Powell comments

The dollar jumped again overnight and benchmark 10-year bond yields flirted with the 3% level after Federal Reserve Chairman Jerome Powell virtually confirmed that the central bank would raise its benchmark rate. by 50 basis points at its May meeting.

Powell had called the U.S. labor market “unsustainably hot” in comments on the sidelines of the IMF’s spring meeting on Thursday, agreeing with the assessment given by many other senior Fed officials over the past two weeks.

As of 6:15 a.m. ET, the US Treasury yield had eased to trade at 2.94%, down from a high of 2.97%. The yield, which is more sensitive to short-term interest rate expectations, had climbed to 2.77% and fell only slightly to 2.76%.

In currency markets, the dollar rose 0.4%, while the greenback also surged against the dollar, which is on track for its worst week since 2015 as the country grapples with a slowdown. due to the pandemic.

2. Russia aims to conquer southern Ukraine

Russian armed forces, creating a contiguous zone of control stretching to the Ukraine-Moldova border, according to a briefing from senior military officials.

The plans would deprive Ukraine of control of one of its ports, cutting off access to world markets for its key agricultural and industrial exports. They stand in stark contrast to President Vladimir Putin’s claims before his invasion that he had planned no occupation of Ukraine and are a clear extension of Russia’s war aims of only a week ago, when it said he wanted to focus on the “liberation” of the Donbass region. Eastern Ukraine.

Separately, a pro-Kremlin news site published, then removed, a report citing a closed Defense Ministry briefing that Russia had lost more than 20,000 soldiers killed and missing in action since its February invasion. .

3. Stocks should open lower; The gap is collapsing; Verizon and Amex revenue expected

US stocks are set to open again on a pessimistic mood later, extending Thursday’s heavy losses on the prospect of aggressive US monetary policy tightening, even as signs begin to emerge that the economy is slowing.

As of 6:20 a.m. ET, they were down 140 points, or 0.4%, while they were down 0.3% and were down in parallel. The three main currency indexes had fallen more than 1% on Thursday, with a decline of 2.1%.

Stocks likely to be targeted later include Gap (NYSE:), which after lowering its guidance for the current quarter, and AB InBev (EBR:), which said it would write the stake of 24 % it owns in a Russian joint venture. business. Emphasis will also be placed on Walt disney (NYSE:), after Florida lawmakers voted to end its special tax status in the state.

Companies expected to report earnings include (NYSE:), (NYSE:), (NYSE:) and (NYSE:), while the German software maker (NYSE:) failed overnight with its , which included also a shot of a hasty Russian exit.

4. Services save the euro zone economy in April; UK retail sales plummet

The eurozone economy, as a reopening service sector, has offset a manufacturing sector increasingly under the weight of supply chain disruptions, sky-high energy costs and other ripple effects of the war in Ukraine.

The S&P Global Index rose to 55.8 in April, indicating that post-COVID expansion is still safe in the short term.

The UK, meanwhile, slumped in March and April amid rising fuel prices and inflation at a 30-year high. The fell more than 1% to $1.2887.

5. Oil Falls as COVID Hits Chinese Demand; eyed platform account

Oil prices fell around 2% overnight as new evidence emerged of China’s sharp drop in demand due to the country’s continuing COVID-19 lockdowns.

Bloomberg reported that the country’s oil demand fell about 1.2 million barrels a day in April, with demand for diesel, jet fuel and gasoline falling about 20% from l ‘last year. Gasoline demand in eastern China, the country’s economic heartland, fell about 40% this month, the agency said citing unnamed industry officials.

As of 6:30 a.m. ET, futures were down 2% at $101.72 a barrel, while down 1.6% at $106.58 a barrel.

Data from Baker Hughes and the CFTC complete the week later, as usual.

Steve R. Hansen