By Geoffrey Smith
Investing.com -- Federal Reserve Chairman Jerome Powell gets to have his say on the negative interest rate debate, while the Senate is unimpressed by House Democrats' latest $3 trillion economic support package. Stocks are set to rebound from Tuesday's Fauci-driven dive, while Europe is set to reopen its internal borders after two months. Plus OPEC and the U.S. government both release data on the state of the oil market. Here's what you need to know in financial markets on Wednesday, May 13th.
1. Powell to speak after Trump chastisement; PPI eyed
Federal Reserve Chairman Jerome Powell will give an eagerly-awaited speech at the Peterson Institute in Washington at 9 AM ET (1300 GMT), a day after President Donald Trump agitated for the Fed to cut rates below zero to support the economy.
Half a dozen of Powell’s colleagues at the Fed have spoken so far this week and none has had a good word to say about negative rates. It would thus be a surprise if the chairman were to contradict a large bloc of fellow policy-makers.
However, the pressure on the Fed to do more isn’t going away. U.S. core consumer prices posted their first back-to-back declines in 38 years in April, and producer price inflation data due at 8:30 AM are also likely to show a steep drop in U.S. companies’ pricing power as demand collapses.
2. House Democrats publish $3 trillion spending package
Another factor putting pressure on the Fed is the apparent inability, or unwillingness, of Congress to put any further fiscal support in place in the near term.
House Democrats late on Tuesday unveiled a fresh package of economic support measures aimed largely at supporting state and local governments through the crisis, and also included a fresh round of direct checks to households.
The package, which carried a $3 trillion sticker price, was immediately dismissed by Senate Republicans. The administration, meanwhile, prefers for now to wait and see whether the states can reopen their economies successfully, The Wall Street Journal quoted White House advisor Kevin Hassett as saying.
3. Stocks set to open higher
U.S. stock markets are set to open higher, rebounding from their worst day since May 1, but still apparently range-bound until the U.S. economy can prove it’s past the worst of the pandemic.
By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures contract was up 153 points, or 0.7%, while the S&P 500 Futures contract was up 0.6% and the Nasdaq 100 futures contract was up 0.7%.
European stocks, however, were down, playing catch up with Tuesday’s session in the U.S. and laboring under figures that showed the U.K. economy shrinking 5.8% in March. The STOXX 600 fell 1.4%, while the FTSE 100 fell 1.0%.
Asian markets bucked the trend, with Chinese equities all broadly advancing and India's Nifty 50 surging in response to Prime Minister Narendra Modi’s announcement late on Tuesday of stimulus package worth over 10% of GDP.
4. Freedom of movement returns to Europe
Germany said it will reopen its borders with France, Switzerland and Austria from June 15, lifting a ban on non-essential crossings by individuals.
The move comes against the backdrop of a steady improvement in the trend of new infections and deaths in most of Europe. Austria and France, in particular, had pressed to remove restrictions in time for the summer tourism season.
It’s a different story in China, where the city of Jilin in the north-east of the country has been locked down in response to a cluster of new cases.
5. OPEC report, EIA inventories data due as crude consolidates
The Organization of Petroleum Exporting Countries will release its monthly report on the oil market at around 7 AM ET with fresh estimates for global supply and demand for the rest of the year.
In addition, the U.S. government will release its weekly estimate of U.S. oil supplies at 10:30 AM ET.
Crude oil prices have eased off by nearly 1% overnight on the back of data from the American Petroleum Institute suggesting that U.S. stockpiles rose by more than forecast last week.
Elsewhere, International Energy Agency chief Fatih Birol said he expected oil demand to remain below 2019 levels for at least a year.