©Reuters
By Geoffrey Smith
Investing.com — Fed spokesmen will line up to push markets one way or the other, a day after the central bank warned of deteriorating liquidity in key markets. There are signs of stress in crypto as stablecoin Terra ‘breaks money’. Stocks are expected to bounce back after Monday’s plunge, but face some challenges as more “no-profit tech” names report “gains.” Tesla is forced to cut production in Shanghai again, and oil prices hit a one-week low on fears about the global demand outlook. Here’s what you need to know in the financial markets on Tuesday, May 10.
1. Incoming! Fed speakers throughout the day
Get your helmets ready and get ready for a barrage of Fedspeak. At least five of the US central bank’s top policymakers will make public appearances on Tuesday and their comments may show whether they are still focused solely on taming or whether the prospect of a global slowdown is beginning to force a rethink.
First to arrive at 7:40 a.m. ET (11:40 GMT) is the New York Fed president, whose status as the Fed’s point man for Wall Street will lend particular weight to his comments, a day later. that the Fed warned of worsening liquidity in key financial markets in its latest Financial Stability Report.
Atlanta follows at 8:30 am ET. Then follows a pause until 1 pm ET, when the governor and Minneapolis are due to speak. Cleveland completes the festivities at 3 p.m.
Otherwise, the data calendar is fairly light, with only the NFIB small business survey standing out. Its main index was flat at 93.0 in May, a slightly better than expected result.
2. Sick Earth
The signs of stress in financial markets that the Fed is talking about are not hard to spot. In addition to ongoing default risks among Chinese property developers and almost any Russian entity from the sovereign on down, there have been big spikes in the nickel and energy markets in recent months.
On Monday, it was the turn of cryptocurrencies, as the ‘stable currency’, theoretically pegged to the dollar, fell as low as 69 cents, triggering a wave of swaps for fiat money.
Terra is an algorithmic stablecoin that is based on arbitrage against other digital assets, rather than asset backing, for value. While the system designed to keep it stable was partially successful in driving Terra’s price back up, it was stuck at just over 90c at 6:25am ET. Cryptocurrency exchange Binance was temporarily forced to limit withdrawals from both Terra and , another digital currency closely linked to it.
The stablecoin phenomenon has some parallels to the role of money market funds during the Great Financial Crisis, in that both asset classes are reduced to a promise of return without risk. The realization that assets backing MMFs in 2008 were not as strong was a major catalyst for the worst of the 2008 carnage.
3. Stocks Point to a Rebound, but Tech Reports Cast Shadows
However, US stock markets believe they have already priced in enough bad news, thank you very much, after another rocky start to the week on Monday.
As of 6:25 a.m. ET, they were up 250 points, or 0.8%, while up 0.9% and up 1.5%. That represents a recovery of between a third and 40% of Monday’s losses.
The first test of sentiment this morning will likely come from Peloton (NASDAQ:) and Workhorse (NASDAQ:), given the particularly negative sentiment towards ‘no-profit tech’. (NYSE:), (NASDAQ:), (NASDAQ:) and (NASDAQ:) are due to report early, while (NYSE:) and (NASDAQ:) lead late reporters. Overnight, the German chemical giant (ETR:) impressed, while (NYSE:) also exceeded expectations.
4. Tesla was forced to cut Shanghai production again
Tesla (NASDAQ:) has been, Reuters reported citing an internal memo. He attributed the move to a lack of elements stemming from region-wide lockdowns that are now entering their eighth week, after a series of what turned out to be false dawns regarding reopening.
Previously released data from the China Passenger Car Association (CPCA) showed that Tesla’s sales in China had fallen 98% in April.
The Shanghai lockdowns were also at the center of two warnings for the German manufacturing sector on Tuesday, with both the think tank and engineering industry group VDMA.
5. Oil hits one-week low on demand fears; API eyes
Crude prices continue to pull back lower amid global growth fears, with prices still caught in a dynamic between Chinese demand destruction and Russian supply tightening.
As of 6:35am (CET), futures were down 1.5% at $101.50 a barrel, while futures were down 1.8% at $104.04 a barrel, with both mixes having touched their lowest point in more than a week.
The American Petroleum Institute is due to report at 4:30 pm ET, against a backdrop of record diesel prices. Meanwhile, Europe continues to pressure Hungary to drop its opposition to its planned embargo on Russian oil and refined products, after EU Commission President Ursula von der Leyen left Budapest empty-handed on Thursday. monday.
Reference-www.investing.com