Stock futures rebound as dollar retreats; Powell speech in focus as Fed maintains hawkish message; Pound bounces back as Bank of England hints at support; Starbucks set to begin labor talks with unionized cafes and Hurricane Ian picks up speed, could strike Tampa as Cat 4 storm.
Here are five things you must know for Tuesday, September 27:
1. — Stock Futures Rebound As Dollar Retreats
U.S. equity futures powered higher Tuesday, potentially snapping Wall Street’s five-day losing streak, while the dollar retreated from its two-decade high amid a modest rebound in global stocks.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.4% lower in overnight trading as investors lifted global stocks from a two-year trough following last night’s slump into bear market territory for the Dow Jones Industrial Average.
In what could be a relief rally following five days of declines, as well as a 7.6% September pullback for the S&P 500, stocks in Europe and Asia booked modest gains as currency markets stabilized and the pound recovered nearly 5% from the historic lows it reached against the dollar earlier this week.
With few key data releases this week ahead of the PCE Price Index on Friday, and only two bluechip earnings reports — both expected on Thursday — to guide markets in the near-term, traders and investors are likely to focus on the dollar’s day-to-day movements, as well as a resurgence in the CME Group’s key volatility gauge, for broader direction.
The Vix index, in fact, was marked 3% higher in overnight trading at 30.84 points, around 4 points south of its recent mid-June peak.
Benchmark 2-year Treasury note yields also eased alongside the dollar, falling to 4.285% in overnight trading following a weaker-than-expected auction of $43 billion in new notes yesterday afternoon.
Oil prices were also active, rising from their lowest closing levels in more than nine months, as the dollar retreated and traders looked to next week’s OPEC meeting in Vienna and the possibility of production cuts to support beaten-down prices.
WTI futures for November delivery were marked $1.37 higher at $78.08 per barrel in overnight trading, while Brent contracts for the same month rose $1.45 to $85.51 per barrel.
In Europe the region-wide Stoxx 600 was marked 0.24% higher in early Frankfurt trading while Britain’s FTSE 100, whose major constituents earn the bulk of their revenues outside of the United Kingdom, gained 0.2.
On Wall Street, futures contracts tied to the S&P 500 are indicating a 26 point opening bell gain while linked to the Dow Jones Industrial Average are priced for a 180 point advance. Futures tied to the tech-focused Nasdaq are indicating a 103 point move to the upside.
2. — Powell Speech In Focus As Fed Maintains Hawkish Message
Federal Reserve Chairman Jerome Powell is set to deliver opening remarks to a banking conference in St. Louis Tuesday as investors remain focused on the central bank’s path for interest rate hikes between now and the end of the year.
With more than twenty Fed speakers in the field this week, and interest rate futures still firmly pricing in the chance of a fourth consecutive 75 basis point rate hike from the Fed next month, investors will be keen to seek any cracks in the inflation-fight facade that Powell and his colleagues have erected since the Chairman’s address in Jackson Hole last month.
Cleveland Fed President Loretta Mester, however, did note in a speech at the Massachusetts Institute of Technology late Monday that while the Fed is “going to set monetary policy that’s appropriate for the U.S. economy”, it won’t do so “in a vacuum thinking that we are an independent island and we are not connected to the rest of the world” and the ongoing market volatility.
That said, her message, and that of her colleagues, with respect to further rate increases remained consistent: “In order to put inflation on a sustained downward trajectory to 2%, monetary policy will need to be in a restrictive stance, with real interest rates moving into positive territory and remaining there for some time” Mester argued.
Powell is due to begin his opening remarks at 10:15 am Eastern time.
3. — Pound Bounces Back As Bank of England Hints at Support
The British pound rebounded from the historic lows it reached against the dollar on Monday, but remains firmly in the sights of foreign exchange traders even after a late-hour statement of potential support from the Bank of England.
The dollar-pound exchange rate, known by currency traders as ‘cable’, has gained nearly 5% since hitting its 1.0325 trough on Monday and was last pegged at 1.0802 in early London dealing.
Still, the slump, triggered last week by a ‘mini budget’ statement from finance minister Kwasi Kwarteng that included $80 billion in new borrowing — the largest increase since 1972 — rattled global currency markets and broader risk sentiment.
Money market trading in the U.K. is now pricing in at least another 1.75% in near-term rate hikes from the Bank of England in order to defend the currency, although the BoE itself would only say yesterday that it’s “monitoring developments in financial markets very closely in light of the significant repricing of financial assets” but isn’t likely to make any interest rate changes until its next scheduled meeting in October.
4. — Starbucks Set To Begin Labor Talks With Unionized Cafes
Starbucks SBUX shares moved higher in pre-market trading after the world’s biggest coffee chain said it plans to begin negotiating labor contracts with unionized cafes next month.
Starbucks, which has seen around 240 of its 15,000 U.S. stores form unions over the past year, will begin “hopefully setting dates and securing locations for contract bargaining” in October. Employee costs will remain a key plank in the group’s recently-improved profit targets, which forecast earnings growth of between 15% and 20% over the next three years.
The new forecasts, which also include bump-ups for comparable sales growth, come amid an overall aim to reach 45,000 stores — with 2,000 new U.S. additions and 4,500 in China — by the end of its 2025 fiscal year.
Starbucks shares were marked 1.6% higher in pre-market trading to indicate an opening bell price of $86.15 each.
5. — Hurricane Ian Picks Up Speed, Could Strike Tampa As Cat 4 Storm
The National Hurricane Center said Tuesday that Hurricane Ian has made landfall in Cuba, and is now gathering speed as it makes its way to the Gulf coast of Florida and the city of Tampa.
Hurricane Ian, now considered a Category 3 story, is carrying maximum windspeeds of 125 miles per hour, the NHC said, and is on a forecast path to brush the west coast of Florida later Tuesday before potentially striking Tampa on Wednesday as a faster Category 4 hurricane.
“Floridians up and down the Gulf Coast should feel the impacts of this,” Governor Ron DeSantis said Tuesday during a press conference at the state Emergency Operations Center. “This is a really, really big hurricane at this point.”
More than 5,000 National Guard troops have been activated as part of the State’s preparation effort, with evacuation orders in low-lying areas of Tampa in place as of late Monday evening.