US PPI, yen intervention, SPR top-up

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By Geoffrey Smith – The effects of Tuesday’s shocking US inflation report for August continue to affect global markets as Wall Street prepares for its monthly producer price report. The yen rebounds as the Japanese finance minister signals preparations to intervene in the currency markets. Alphabet loses an appeal against a $ 4 billion antitrust penalty from the EU, while the EU appears to have abandoned its plan for a cap on Russian gas imports. Oil prices rebound as President Biden signals a possible filling of the Strategic Petroleum Reserve, even if that will require a further drop in prices first. Here’s what you need to know about the financial markets on Wednesday, September 14th.

1. US CPI spreads to global markets

The US shock has spilled over into global markets, with the dollar holding most of its gains on Thursday, European and Asian equities tumbling as markets have assessed the risk that the Federal Reserve may now raise the Fed Funds rate of one full percentage point next week.

The shift in sentiment caused by the higher-than-expected press could be corroborated at 08:30 ET (12:30 GMT) with the release of the producer price inflation numbers for August. These will give a clearer indication of whether companies are still able to expand or at least defend their profit margins. An indication of margin pressure surfaced late Tuesday with Amazon (NASDAQ 🙂 having to throw in another $ 450 million to ensure it had enough drivers for the upcoming holiday season.

Analysts expect it to show the same pattern as consumer price inflation, with falling gasoline prices generating a negative number, but with price growth accelerating to 0.3% from 0.2% in July.

2. The yen rebounds as Japan approaches intervention

Tuesday’s rally raised the clearest sign that Japan is preparing to intervene in currency markets to support the.

Newswires reported that the Bank of Japan has carried out “rate checks” with forex traders, a step that has traditionally been a prelude to effective market intervention.

“The recent moves are swift and one-sided and we are very concerned,” Finance Minister Shunichi Suzuki told reporters, confirming the intervention was on the table. “If these moves continue, we must respond without ruling out any options.”

The yen, whose status as a financing currency gives it a central role in wholesale financial markets, rose 1% against the dollar and 1.5% against the dollar in response.

3. Stable stocks ahead of the PPI after the worst defeat of the last two years

US equity markets are poised for a rebound of the dead-cat variety in the open, awaiting the release of the PPI numbers, as traders lick their wounds and marvel at President Joe Biden’s victory over inflation on Monday.

At 6:15 am ET, they were up 116 points, or 0.4%, while they were up 0.5% and 0.6%. Major cash indices suffered their worst one-day drop in over two years on Tuesday after the August CPI report suggested core inflation is still accelerating.

Stocks likely to be the focus of attention later include Alphabet (NASDAQ :), after Google’s appeal against a $ 4.3 billion fine from the European Union was largely dismissed, and Inditex ADRs ( OTC :), which are up after owner of Zara and Massimo Dutti put a bullish update overnight in Europe.

4. The EU lowers the idea of ​​the price of gas after the rejection of the Member States

The European Union appears to have abandoned its plans to limit the price of natural gas after member states failed to agree on how to do so.

A “State of the Union” speech by EU Commission President Ursula von der Leyen nevertheless repeated plans to impose an unexpected tax on oil and gas companies and a mechanism to decouple wholesale electricity prices. from gas prices. She has also stuck to plans to impose a mandatory cut in peak electricity consumption this winter, although it seems likely that Member States will keep the final say on how to achieve this.

Elsewhere, French network operator RTE has warned of partial and local blackouts this coming winter. The benchmark rose 5.7% in response, also supported by awareness of the risk that Russia’s recent battlefield losses could trigger a more extreme reaction in the ongoing energy war, which in July brought a painful 2.3 %.

5. Oil bounces as Biden’s eyes fill the SPR; EIA data due

Crude oil prices recovered about half of their losses on Tuesday as the dollar’s surge and a large increase in crude oil inventories brought about the new price pressure. Due to expire at 10:30 am ET as usual, analysts are expecting an 833,000 barrel increase from the previous week.

The market has been supported by signals that the US is preparing to replenish its Strategic Petroleum Reserve, President Joe Biden has indicated that the government will revert to supply when (or if) prices drop to $ 80 a barrel.

Even so, earnings were limited as predicted by the International Energy Agency for the year in its latest monthly report. it grew 0.4% to $ 87.67 a barrel, while it grew 0.2% to $ 93.36 a barrel.

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