The yen fell to a fresh 24-year low against the dollar as China’s trade figures cast doubt on the economic outlook for Asia.
The Federal Reserve releases its Beige Book survey as the Bank of England prepares to fight for its independence from new UK Prime Minister Liz Truss.
Apple introduces its new 5G-enabled iPhone and Vladimir Putin criticizes the US.
Here’s what you need to know in the financial markets on Wednesday, September 7, Brazil’s Independence Day holiday.
- The Incredible Shrinking Yen
The fall in the Japanese yen deepened after Tokyo warned of “rapid and unilateral” currency moves – without doing anything to stop them.
The dollar rose to a new 24-year high of 144.38 yen after China’s monthly trade balance data showed a sharp slowdown in imports and exports, suggesting that slowing global demand for Chinese-made goods is fueling Chinese demand for Japan’s capital goods.
The dollar is now up more than 31 percent against the yen over the past 12 months, and the pace of the Japanese currency’s fall this week has sparked rumors of intervention by the Bank of Japan, possibly in conjunction with other central banks. However, Reuters quoted former Japanese currency diplomat Hiroshi Watanabe as saying that Japan should not intervene or change monetary policy in response as it would be ineffective in stopping the dollar’s advance.
- Central Banks on Alert Again
It’s a big day for central banks around the world again, with the Bank of Canada and the National Bank of Poland expected to raise interest rates again. Poland’s rate hike cycle appears to be coming to an end, with the NBP expected to raise just 25 basis points this time around after a series of higher ones in recent months.
However, analysts expect a huge 75 basis point increase from the Bank of Canada, in what would be an echo of the Federal Reserve’s latest hike and – possibly – an anticipation of tomorrow’s action at the European Central Bank.
The Fed itself releases its Beige Book survey, while the MBA releases weekly numbers on mortgages and real estate interest rates. There will be early speeches by Loretta Mester and Tom Barkin (only Mester has a vote on the FOMC this year), and later by Fed Vice Chair Lael Brainard.
- Stocks should have volatile day
US stock markets were showing a modest recovery after falling to fresh two-month lows early Tuesday. Concerns are related to the global economic slowdown and its impact on corporate earnings, which erased the small rise.
At 08:50, Dow Jones contract futures were down slightly by 2 points, or 0.01%, while S&P 500 futures and Nasdaq 100 futures retreated 0.07% and 0.14%, respectively.
ADRs of Petrobras (NYSE:PBR) and Vale (NYSE:VALE) were also down in pre-market trading on Wall Street. The oil company’s shares fell 0.36% and the mining company’s 0.33%. Both ADRs will be monitored by Brazilian investors on a day when the local stock market is closed, as will the EWZ ETF, which replicates the performance of Brazilian stocks in New York. The ETF was down 0.56%.
Apple (NASDAQ:AAPL) (BVMF:AAPL34) is likely to dominate the session, with the launch of the new iPhone 14, despite expectations of only modest incremental changes to its design and features. Overnight, Spanish oil and gas company Repsol (BME:REP) said it will sell 25% of its oil exploration and production business to energy and infrastructure specialists EIG, with the aim of listing the business in New York in four years.
- Europe Targets Energy Price Ceilings
The European Commission is expected to propose a cap on the wholesale price of electricity for most types of generation in an effort to prevent a collapse of European industry during the winter.
The Financial Times reported that the Commission will propose capping the price of power generated by sources other than gas at 200 euros per megawatt-hour when EU energy ministers meet on Friday. The current spot price of German electricity in Germany, the regional benchmark, is above 450 euros/MWh, while French prices hit 1,000 euros last week.
Wholesale electricity prices have soared because gas is usually the energy source for marginal power generation, which determines wholesale prices. Gas prices are about 10 times the level prevailing over the past 10 years.
5.Oil Prices Fall on Chinese Demand Fears
Crude oil prices continued to trade near seven-month lows as the latest trade data from China did nothing to reassure the global demand picture.
Burning warnings from Russia’s President Vladimir Putin that he would withhold all forms of Russian energy from “hostile” countries only succeeded in boosting prices by about half a percent, holding down the decline.
The WTI oil futures contract retreated 0.31 percent to $86.60 per barrel, and Brent crude futures to $92.50 per barrel at 9:01 a.m.
“We will not supply anything if it is contrary to our interests, in this case economic [interests],” Putin said at a conference in Russia’s Far East. “No gas, no oil, no coal, no fuel oil, nothing.”
The American Petroleum Institute will update the U.S. supply and demand balance at 5:30 p.m., a day later than normal due to the Labor Day holiday, which usually signals the end of peak summer demand in the U.S.