Here are five things you must know for Wednesday, July 6:
1. -- Stock Futures Steady, Yield Curve Inverts As Recession Fears Linger
U.S. equity futures edged lower in pre-market trading, while global stocks steadied and the dollar held near its highest levels in two decades, as investors closely track developments in the bond market that point to a near-term recession in the world's biggest economy.
Safe-haven trading has lifted the U.S. dollar index, which benchmarks the greenback against a basket of its global peers, to the highest levels in two decades this week as factory activity and output data from major economies around the world slows and inflation pressures continue to boost input costs and squeeze margins.
In the bond market, benchmark 2-year Treasury note yields traded north of 10-year note yields for most of the overnight session, after a so-called 'inversion' during yesterday's session on Wall Street.
Benchmark 10-year notes were last seen trading at 2.811% while 2-year notes were changing hands at 2.838%.
Investors typically associated a sustained inversion as a signal of near-term recession as traders sell short-term notes in anticipation of rate hikes, but buy longer-dated paper in advance of an economic slowdown.
To that end, the Atlanta Fed's GDPNow growth forecasting tool suggests the economy is contracting at a 2.1% clip as it enters the third quarter, following what is likely to be two consecutive quarters of shrinkage between January and June.
That puts a great deal of focus on the Federal Reserve and its committed path to raising interest rates in order to slow the fastest pace of inflation in forty years. Chairman Jerome Powell has cautioned that tame consumer price pressures will likely require 'pain' from the U.S. economy, but some investors wonder if the Fed will slow the pace of signaled rate hikes if the U.S. tips into recession.
Minutes from the Fed's June meeting, due later today, could provide at least some clues as to that prospect, and could be why markets have steadied in overnight trading.
Europe's Stoxx 600 was marked 1.21% higher in early Frankfurt trading, following on from a modest 0.98% decline for the Asia-region MSCI ex-Japan index and a 1.2% pullback for the Nikkei 225 in Tokyo.
On Wall Street, futures tied to the S&P 500 are indicating a 3 point opening bell dip while those liked to the Dow Jones Industrial Average are priced for a 15 point retreat. Futures linked to the tech-focused Nasdaq are indicating a 2 point decline.
2. -- Fed Minutes In Focus As Growth Bets Quickly Fade
The Federal Reserve will publish minutes from its June policy meeting later today, offering details as to the debate behind the central bank's biggest single-day rate hike in three decades and its signaling of more increases over the coming months.
The Fed lifted its base lending rate by 75 basis points, the biggest since 1994, to a range of 1.5% to 1.75% on June 15, and said near-term rate moves would be needed in order to combat the faster since the early 1980s.
The Fed also lifted its forecasts for U.S. unemployment, to a rate of 3.7% from a prior forecast of 3.5%, while cutting its 2022 GDP growth estimate to 1.7%, well shy of its previous indication of 2.8%.
Fed Chair Jerome Powell, who had guided investors to a rate hike of only 50 basis points, said at the time that rate hikes of that size won't be "common", but current market betting suggests an 88% chance of a similar-sized hike when the Fed meets later this month in Washington.
What will be crucial for investors today, however, is whether Fed Governors had any appetite for a 100 basis point increase in early June, given the pace of inflation at the time, and whether any voting members indicated that slowing growth -- or indeed easing inflation pressures -- would allow for a pause in rate hikes heading into the fall.
The minutes will be published at 2:00 pm Eastern time later today.
3. -- Oil Prices Higher, OPEC Secretary General Barkindo Dies at 63
Global oil prices edged higher Wednesday, following the biggest single-day decline in nearly four months, as commodity markets continue to reflect recession fears.
The overnight moves, however, were complicated by news that Mohammad Barkindo, the secretary general of OPEC, has died at the age of 63 just hours after delivering a speech in Abuja.
Barkindo, who served as Nigeria's energy minister prior to taking on the top role at OPEC in 2006 -- and again in 2016 -- was seen by many to have helped transform the cartel from a loose collective of disparate interests into a more organized group of oil producing nations that, along with Russia, have dictated the pace of output for much of the past six years.
"Serving as Secretary General of OPEC for two terms has been the honor of a lifetime," Barkindo said Wednesday. "Over the past six years, we have witnessed both challenging and historic moments, which have underscored time and again the importance of cooperation and teamwork."
OPEC's role in delivering more crude to global markets, at a time of elevated prices but uncertain demand, will be crucial to President Joe Biden's effort in lowering domestic energy prices and slowing inflation.
WTI crude futures for August delivery, the most tightly-linked commodity to U.S gasoline prices, were marked 54 cents higher on the session at $100.04 per barrel while B(rent crude contracts for September delivery, the global pricing benchmark, rose $1.35 to change hands at $104.17 per barrel.)
Data from the AAA motor club, meanwhile, shows that the national average for U.S. gas prices fell another 2 cents overnight to $4.779 per gallon, the lowest in more than a month.
4. -- Amazon Takes Small Stake In Grubhub
Just East Takeaway (TKAYF) shares surged higher in Amsterdam trading Wednesday after the struggling meal delivery group said retail giant Amazon (AMZN) had taken a 2% stake in its U.S. division known as Grubhub.
The deal allows Just Eat, which purchased Grubhub last year in an all-share deal worth $5.8 billion, to sell another 13% stake to Amazon if their newly-unveiled promotion -- which includes free delivery for orders over $12 in the 4,000 cities that Grubhub operates -- attracts enough customers for the online retailer.
"I am incredibly excited to announce this collaboration with Amazon that will help Grubhub continue to deliver on our long-standing mission to connect more diners with local restaurants," said Grubhub CEO Adam DeWitt. "Amazon has redefined convenience with Prime and we're confident this offering will expose many new diners to the value of Grubhub+ while driving more business to our restaurant partners and drivers."
Just Eat Takeaway shares were marked 17.22% higher in Amsterdam at €16.104 each, while Amazon shares slipped 0.44% lower in pre-market trading to indicate an opening bell price of $113.00 each.
5. -- Boris Johnson Faces Latest Political Crisis As Senior Ministers Resign
U.K. Prime Minister Boris Johnson's leadership was left hanging by a thread Wednesday as a fresh political scandal threatens to end his controversial tenure and possible trigger fresh elections in Europe's second-largest economy.
Johnson lost two key cabinet members last night -- including his second in command, finance minister Rishi Sunak -- amid a rolling controversy surrounding the appointment of his close ally, Christopher Pincher, as Chief Party Whip.
Pincher was forced to resign last week amid allegations of groping two men in a central London nightclub. Allegations of a similar nature were made known to the Prime Minister prior to his appointment.
The scandal is just the latest in a series of controversies that have plagued Johnson's leadership following his landslide election victory in 2019, culminating last month in a narrow but bruising victory in a vote of 'no confidence' from his parliamentary colleagues.
Several other senior government ministers submitted resignations Wednesday, as well, leaving the Prime Minister fighting for his political future.
