Squawk Box Europe Express

The Dow drops 1,000 points following Federal Reserve Chairman Jerome Powell’s Jackson Hole speech. Powell sparked a global sell-off after warning of increased pain to come in the struggle against rampant inflation. The ECB follows suit, predicting further sacrifices to curb price pressures on this side of the Atlantic. In China, July’s industrial profits slump on the back of continuing Covid restrictions and power outages hit factory performance. Regulators have called on banks to provide more support. And in crypto news, Bitcoin is on course for its fifth day of declines, dipping below the $20k mark amid concerns about the Fed’s rate hike trajectory.

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The Dow finishes in the green with U.S. markets eagerly anticipating Federal Reserve Chairman Jerome Powell’s Jackson Hole speech later today. Fed officials speaking to CNBC at the Wyoming symposium have reiterated the need to keep raising interest rates to bring down U.S. inflation. President Biden signs an executive order to boost chip production. At a mid-term elections rally in Maryland he called Trump philosophy ‘semi-fascist’. In Zaporizhzhia, Ukraine, back-up systems have sparked into action following shelling at Europe’s largest nuclear plant, which disconnected it from the country’s grid. British energy regulator Ofgem prepares to lift the price cap, causing bills to soar for millions of households from October.

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U.S. markets are in the green after three negative sessions with investors seeking further Fed clarity ahead of the start of the Jackson Hole Symposium today. President Biden fulfills his 2020 campaign promise of student loan forgiveness one week before a moratorium on payments and interest. The move will affect millions of graduates with $10,000 debts. Tesla undergoes its second stock split in 2 years on a 3-for-1 basis. In Germany, Economy and Climate Protection Minister Robert Habeck announces energy-saving measures designed to save 2 per cent of gas consumption this winter.  

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U.S. indices are down for their third straight session following further hawkish comments from the Federal Reserve. Investors’ expectations that Chairman Jerome Powell would move away from the central bank’s tightening progamme have been dampened. In energy news, crude is also down on anticipation that any Opec+ output cuts could coincide with the return of Iranian oil to markets as part of a renewed nuclear deal. Chinese e-commerce giant feels the strain of continuing Covid restrictions in the country, posting a record-breaking slow quarter. And the U.S. is set to unveil a $3bn security package for Ukraine which is today marking six months since Moscow’s invasion of its territory.   

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U.S. markets post their worst session in June with the 10-year Treasury yield hitting 3 per cent. Investors are anticipating Fed rate setters will double-down on their hawkish positions at the Jackson Hole Symposium later this week. In forex news, the dollar is up while the euro plunges to a two-decade low. German Chancellor Olaf Scholz visits Canada to seek alternative energy sources following the Russia’s invasion of Ukraine. In China, the PBOC is set to off $29bn worth of special loans to property developers in order to stabilise a worsening housing crisis. And in retail news, Adidas announces the surprise departure of CEO Kasper Rørsted.    

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The S&P 500 breaks a 4-week rally and Treasury yields rise ahead of the Jackson Hole meeting of central bankers this week. Beijing cuts its base lending rate in a bid to revive its faltering economy amid extended Covid restrictions and a property sector crisis. Russia is set to undertake a further 3 days of ‘planned maintenance’, halting natural gas deliveries to Europe. And in entertainment news, Cineworld is reportedly to file for bankruptcy, citing a lack of blockbuster movies.

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U.S. markets look to attempt to revive their recent rally. The S&P 500 is on track to end its fifth straight week in the green. St. Louis Federal Reserve President James Bullard has repeated his call for a further 75bps hike in September. Home goods retailer Bed, Bath & Beyond sees shares nosedive after billionaire investor Ryan Cohen withdraws his entire stake in the company. Also in the U.S., Kohl’s beats expectations but shares fall on the news that the department store chain has cut its guidance as middle income consumers feel the inflation pinch. Greece prepares to formally exit Brussels’ ‘enhanced’ fiscal surveillance programme to mark the end of its debt crisis.

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The Dow’s five-day winning streak ends and Treasury yields grow as the Federal Reserve admits its aggressive tightening policy has been risky and that inflation still shows no signs of receding. We hear from the new Opec Secretary General Hathaim Al-Ghais who says Chinese consumption fears are exaggerated and that a return to pre-Covid demand depends on jet fuel recovery. In the U.S. Target misses Q2 expectations and sees profits plunge by 90 per cent despite discounts on clothing and electronics.  

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It’s a fifth straight day of gains for the Dow since May. Retail stocks have been particularly resilient. Walmart ups its full-year guidance after beating both Q2 revenue and earnings forecasts. Shares are up by 5 per cent for the retail giant. CEO Doug McMillon remains cautious, telling this channel that inflation is hurting U.S. consumers, forcing them to adapt their shopping habits. In China, an extended heatwave has prompted authorities to shut down factories in southern provinces for six days to save electricity. And in energy news, crude prices recover and there are signs the oil market is tightening following a drop in U.S. stockpiles.  

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The U.S. markets rally continues with the Dow closing above its 200-day moving average for the first time in four months. Disney shares are up on the news that investor Daniel Loeb’s Third Point is to buy a new stake in the entertainment giant. The hedge fund manager has also written to CEO Bob Chapek urging him to spin off sports network ESPN. In mining news, BHP posts its best profit in 11 years and has suggested it may improve a bid for Oz Minerals. And in Germany has introduced a new gas price levy on households and businesses with Energy Minister Robert Habeck blaming Russia for allegedly weaponising resource security in the wake of the Ukraine conflict.

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