Debt ceiling, energy relief, Biden-Xi and jobless claims
By Geoffrey Smith
Investing.com – Stocks are expected to extend their rally at the open, supported by a looming deal to temporarily delay the debt ceiling crisis and a sharp price reversal in the wake of Vladimir Putin’s jawbone on Wednesday. Weekly jobless claims are due and Amazon’s Twitch service (NASDAQ 🙂 suffers a major hack. German industrial production fell in August, and Joe Biden and Xi Jinping agreed in principle to meet virtually before the end of the year, which appears to be another temporary sign of improving US-China relations. Here’s what you need to know about the financial markets on Thursday, October 7.
1. Can you drive a ceiling down the street?
The United States has avoided – for now – the risk of a damaging default on its debt as Senate Minority Leader Mitch McConnell has proposed a temporary suspension of the debt ceiling until early December.
The offer comes with a condition: Democratic lawmakers must tie a dollar level to the new cap required by the extension. Senate Majority Leader Chuck Schumer said the offer was likely to be accepted.
The market’s reaction to Wednesday’s news underscored how much such concerns have weighed on recent performance in U.S. markets, even though the ritual political theater accompanying the debate has been a hallmark of U.S. politics for the past 25 years. It is also a reminder of the heavy political price that could be paid by any party considered responsible for the failure of the government. drifted around the 1.52% level overnight.
2. The European energy crisis fades after Putin’s intervention
Another market enjoying at least a temporary reprieve has been the European natural gas market, where the UK spot price has retreated 49% in response to signs that Russia is prepared to increase supplies. in Europe.
A carefully organized intervention by President Vladimir Putin on Wednesday hinted at the prospect of an increase in flows, against an unspoken subtext according to which this would depend on the authorization of a rapid start of shipments via the Nord Stream 2 gas pipeline. also criticized Europe’s attempts to give the cash market a greater role in price formation and reiterated Russia’s offer of new long-term contracts, as well as its continued desire to own and operate storage facilities in Europe.
Political opposition to these two points in Europe remains strong, for reasons of security of supply. However, the precarious position of the European economy can undermine this. German industrial production fell 4% in August, the second disappointing data set from Europe’s largest economy in as many days.
3. Stocks should open to the upside; weekly unemployment claims in sight
US stocks are expected to extend their rally when markets open later, supported by both the debt ceiling deal and energy price relief.
At 6:15 am ET (10:15 GMT), they were up 195 points, or 0.6%, to their highest level in 10 days, while they were up 0.7% and 1.0%.
Actions likely to be finalized later include Amazon, after its Twitch service suffered a major hack, and Royal Dutch Shell (LON :), which said it expected a substantial increase in streams of cash flow despite Hurricane Ida’s earnings impact of $ 400 million. ConAgra Foods publishes results, shedding new light on the ability of companies to pass higher input prices on to consumers.
The data calendar is led by weekly jobless claims, while New York Federal Reserve Chief John Williams is also expected to speak.
4. Biden – Xi meeting agreed
US President Joe Biden and his Chinese counterpart Xi Jinping have agreed to hold a virtual meeting by the end of the year, the White House said. The news comes on top of signs of a thaw in US-China relations, despite the Biden administration’s refusal so far to lift any of the sanctions imposed by his predecessor Donald Trump.
Officials who met in Zurich informed media that the talks were more productive than the previous exchange in Anchorage, Alaska a few weeks ago.
The move follows a resolution of a long-standing issue in bilateral relations in September, which saw Huawei’s CFO released from detention in Canada and allowed to return home, in exchange for an agreement on a Justice Department fact statement that will give the United States a stronger legal case for sanctions against the Chinese telecommunications company.
5. Oil slows on jump in inventories, reports SPR publication
Crude oil prices fell overnight, dragged down by developments in natural gas prices and weighed down by reports that the United States could sell oil from its strategic oil reserve. This is in addition to government data showing a surprising 2 million barrels increase in US inventories last week.
Reports also suggest that the Biden administration is considering reintroducing a ban on crude oil exports, which was lifted by Donald Trump after being in place for nearly four decades.
As of 6:30 a.m. ET, futures were down 1.7% to $ 76.08 per barrel, while they were down 1.3% to $ 80.08 per barrel.