Inflation concerns could give back most of yesterday’s gains on Wall Street as U.S. stocks tumble into their worst first half performance since 1970.
U.S. equity futures slumped lower Wednesday, potentially giving back most of yesterday’s solid gains, as investor focus returned to the impact of speeding inflation on global economic growth.
Fresh inflation readings from South Africa to Great Britain indicated that central bank action, at least to date, has had little impact on consumer price pressures, while digging into the readings showed a broadening of their effects, particularly in the United Kingdom, where CPI hit a four-decade high of 9.1%.
The prospect of slower growth for the world’s major economies was also linked to a weaker session for Asia stocks, which fell sharply amid concern over a new round of Covid restrictions. That sent the U.S. dollar firmly higher in overnight trading and established the ‘risk-off’ narrative that pulled futures lower.
The U.S. recession debate has intensified, as well, following data from the Atlanta Fed showing essentially no growth in the domestic economy this quarter, following a 1.5% contraction over the first three months of the year, alongside a slow by steady increase in weekly jobless claims, stalled consumer spending and a weakening housing market.
All of these issues are likely to form the bulk of questions put to Federal Reserve Chairman Jerome Powell as he begins two days of testimony on Capitol Hill later this morning.
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Powell will face members of the Senate Banking Committee today at 9:30 am Eastern time, with a follow-on sitting before the House Financial Services Committee Thursday, amid the fastest pace of domestic inflation in more than four decades – and just four months ahead of key mid-term election that could see Republicans regain control of both Houses of Congress.
Against that backdrop, Europe’s region-wide Stoxx 600 was marked 1.4% lower in mid-day trading in Frankfurt, following on from a 2.3% slide for Asia’s MSCI ex-Japan benchmark.
In the U.S., benchmark 10-year Treasury bond yields held at 3.228% in overnight trading, against a 3.153% peg for 2-year notes, while the dollar index rose 0.1% against a basket of six global currencies to 104.477 in early European trading.
On Wall Street, futures tied to the Dow Jones Industrial Average are indicating a 325 point opening bell slump while those linked the S&P 500, which is down 21% for the year, are priced for a 47 point decline. Futures linked to the tech-focused Nasdaq are looking at 160 point opening bell pullback
Global oil prices were also firmly in the red as President Joe Biden prepared to ask Congress to suspend the federal gas tax for at least three months, while asking states for similar relief, in order to ease a key component of domestic inflation in the world’s biggest economy.
The widely expected move — alongside the impact of new Covid infections in China and the prospect of further business and factory restrictions — took nearly $5 from WTI crude futures for August delivery, which were last seen changing hands at $104.69 per barrel.
Data from the AAA motor club, meanwhile, indicated that U.S. gas prices eased from this week’s all-time high to a national average of around $4.955 per gallon last night, a move that still leaves pump prices some 61.8% higher than this time last year.
In terms of individual stocks, Boeing (BA) – Get The Boeing Company Report shares moved 2% lower after the planemaker cautioned that supply chain disruptions will likely continue until at least the end of next year.
Speaking at Bloomberg’s Qatar Economic Forum in Doha, CEO Dave Calhoun said aircraft demand is surging, thanks in part to firm rebound in post-pandemic travel, but labor and part shortages will make it difficult for suppliers to meet customer needs.