By Geoffrey Smith
Investing.com – The dollar falls as European currencies breathe a sigh of relief on reports that the missile that hit Polish territory on Tuesday was, in fact, fired by the Ukrainian Air Defense Forces rather than Russia. However, crude prices soon found another reason to be nervous about geopolitical risk. The US session is likely to focus on the consumer, with retail sales data for October set to outpace inflation and earnings from Objective (NYSE:), TJX (NYSE:) and Lowe’s (NYSE:) will follow Walmart’s (NYSE:) impressive report on Tuesday. Shares are reported flat before opening. Nvidia (NASDAQ:) reports stock data up after the bell. And the inflation picture is going from bad to worse in the UK Here’s what you need to know about the financial markets on Wednesday 16 November.
1. Retail sales expected to outpace inflation; Can Target match Walmart?
The US is to report data for October that is expected to outpace the monthly price increase for the first time in several months.
Retail sales are forecast to have risen 1.0% since September, compared with an increase of just 0.4% in . If so, it will restore some hope to the Federal Reserve’s arguments that it can engineer a “soft landing” for the US economy in the coming months.
The overall number is likely to be inflated by increased spending on gasoline, but is expected to have increased by 0.4%, even a little short of the 0.3% reading.
Company-level data from the retail industry will continue with reports from Target and TJX. Lowe’s has already reported, exceeding expectations in both highs and profits.
2. Europe exhales amid signals that the missile blast in Poland was not fired by Russia
European currencies retreated and surged after reports downplayed the risk of NATO being drawn deeper into Russia’s war in Ukraine.
Polish President Andrzej Duda said it was “highly probable” that the missile that landed in southeastern Poland on Tuesday, killing two, was fired by Ukraine’s air defense forces rather than Russia. The missile was apparently one of several launched to counter another devastating wave of attacks on Ukraine’s energy sector, which has caused blackouts in cities across the country.
The incident had previously triggered fears that Russia had directly struck Poland, creating the risk that Poland would trigger the activation of NATO’s mutual defense commitments and force a direct NATO response.
The Polish and Hungarian rallied sharply on the news, while the Dollar also rallied against the Dollar.
3. Stocks should open flat; EVs Spotlight After Mercedes Cuts Prices; Nvidia late
US stocks are expected to open mixed thereafter after relatively mild data on Tuesday boosted hopes of a relatively quick end to the Federal Reserve’s interest rate hikes.
At 06:20 ET (11:20 GMT), , and were all flat, having climbed between 0.2% and 1.5% on Tuesday.
While the country’s retailer earnings will get most of the initial attention, there will also be attention on EV makers after Mercedes Benz (ETR: ) said it would make it up to 33% in China. ADRs for Nio (NYSE:) and Xpeng (NYSE:) fell more than 2% in the premarket, while Tesla (NASDAQ:), which hit a two-year low last week under selling pressure from the CEO Elon Musk, remained unchanged.
After the bell, Nvidia and Cisco (NASDAQ:) will wrap up the day.
4. UK inflation hits 11%
Inflation may be down in the US, but it’s still in Europe.
The UK was up 11.1% on the year in October, thanks to sharp increases in energy and food prices. This is despite government action to limit household energy bills. Prices went up 2.0% alone.
The numbers, which were above consensus forecasts, complicate Chancellor of the Exchequer Jeremy Hunt’s task as he prepares to announce the government’s spending and tax plans on Thursday. These will now have to incorporate another large increase in UK inflation-linked debt service and may have to offer bigger wage increases to appease public sector workers, whose earnings have risen just 2% in the year to September.
The rose after Hunt signaled the government would not seek to obstruct further interest from the Bank of England.
5. Oil swings on geopolitical volatility; EIA inventories due
Crude oil prices fluctuated sharply overnight under the influence of geopolitical developments. After edging higher late Wednesday in response to news of the missile incident in Poland, they retraced early trade as the risk of an escalation in Ukraine abated.
However, a drone strike on an Israeli-owned tanker off the coast of Oman at the tip of the Arabian Peninsula quickly reinstated the additional risk premium.
As of 06:35 am ET, prices were up 0.2% to $87.09 a barrel, while they were up 0.2% to $94.09 a barrel.
Weekly US government data on crude oil and distillates is expected at 10:30 AM ET.