By Geoffrey Smith
Investing.com — There’s a big data dump heading your way, with U.S. housing starts, jobless claims, and the Philly Fed survey all due at 08:30 ET (13:30 GMT). Various Federal Reserve officials line up to say their piece about the outlook for interest rates in the hours following. Grain prices fell after Russia and Ukraine renewed their deal on safe passage for Ukrainian exports for another 120 days, while comments from the Pentagon on Wednesday have hit oil prices, by raising speculation that the U.S. may pressure Ukraine into accepting peace talks. Stocks are expected to open with losses after another weak update from fallen angel NVIDIA. And the U.K. gets the chance to tell the bond markets how sorry it is for that regrettable flirtation with fiscal insanity in September. Here’s what you need to know in financial markets on Wednesday, 17th November.
1. U.S. data dump and Fed speakers galore
The U.S. releases weekly jobless claims and housing starts data and the Philadelphia Federal Reserve’s monthly business survey into a market that was forced to reassess its recent rally on Wednesday by a stronger-than-expected retail sales report for October.
Late on Wednesday, Federal Reserve Governor Chris Waller added his voice to others suggesting that a cut of only 50 basis points at the Fed’s next meeting would be acceptable, given broadening signs that inflation may have peaked. Even so, other comments from San Francisco Fed President Mary Daly, hinting at a ‘terminal’ Fed Funds rate of over 5%, have underlined that the Fed’s tightening cycle is far from over.
2. Grain deal renewal pushes wheat to 2-month low
Global wheat prices fell to their lowest in over two months after Russia and Ukraine agreed to extend the deal safeguarding exports of foodstuffs from Ukrainian ports for another 120 days.
The announcement dispelled fears that Russia may walk away from the deal after making disgruntled noises about it in the wake of a Ukrainian attack on the Kerch strait bridge last month. Doubts about the deal had also strengthened after a Ukrainian air defense missile’s explosion in Poland briefly threatened to escalate the war in Ukraine.
The deal does not appear to include guarantees for the export of Russian ammonia from the port of Odesa, something that Moscow had been pressing for. That may keep the pressure on global ammonia prices and restrict global supplies of fertilizer next year, putting longer-term upward pressure on crop prices.
3. Stocks set for lower open; NVIDIA disappoints again, while Tencent sparks China rout
U.S. stock markets are set to open lower again after a strong retail sales report for October cast doubt on the narrative that weakening demand will force the Fed into an early end to rate hikes.
The mood – especially in tech – isn’t being helped by another weak set of figures from NVIDIA (NASDAQ:NVDA), which showed how the twin pandemic-era bubbles in video gaming and cryptocurrency mining have popped. Also weighing on sentiment is a selloff in Chinese technology stocks, driven by Tencent’s (HK:0700) announcement on Wednesday that it will unload its stake in Meituan (HK:3690) in a move that was interpreted as a signal that its battles with Beijing’s regulators aren’t over yet.
By 06:10 ET, Dow Jones futures were down 148 points, or 0.5%, while S&P 500 futures and Nasdaq 100 futures were down in parallel. The Nasdaq had lost 1.5%, while the Dow fell 0.1%, and S&P fell 0.8% on Wednesday.
4. U.K. to reveal new fiscal plans
The U.K. government will release its tax and spending plans for the next year, desperately trying to undo the damage done by Liz Truss’s reckless tax cut gamble.
While bond markets have recovered since Truss was replaced as Prime Minister by Rishi Sunak, Bank of England Governor Andrew Bailey told parliament on Wednesday that it will take time for the U.K. to repair its reputation for economic competence.
Chancellor of the Exchequer Jeremy Hunt is expected to announce a significant tightening of fiscal policy, split 60/40 between spending cuts and tax increases, in order to put public debt back on a downward trajectory in the medium term. Among the various pitfalls he’ll have to negotiate are massive backlogs in the National Health Service, restive public sector unions, and the rising cost of servicing the U.K.’s inflation-linked debt.
5. Oil down on China inventories report, Milley comments
Crude oil prices tested a three-week low amid signs that China is still buying more oil than its economy actually needs at the moment, and on hopes that this week’s events in Ukraine may yet bring about an end to hostilities.
Mark Milley, head of the U.S. joint chiefs of staff, had told a press conference that an outright military victory for Ukraine is not likely in the near term, stoking speculation of pressure behind the scenes on Ukrainian President Volodymyr Zelensky to moderate the conditions he has set for peace talks with Russia.