Here are five things you must know for Monday, September 26:
1. — Stock Futures Edge Lower Amid Currency Market Chaos
U.S. equity futures edged modestly lower Monday, while the dollar extended its relentless march higher, as investors retreated from risky global markets amid widespread disruption in currencies and increasing concerns of a near-term recession.
An overnight slump in the pound, which briefly dragged the British currency to an historic low of 1.0327 on the heels of last week’s ‘mini-budget’ from the new Conservative government, was echoed by fresh moves to the downside for the euro, which hit a 20-year low of 0.9689 against the U.S. dollar, and threats of currency intervention from both China and Japan.
The dislocation follows last week’s Federal Reserve rate decision, which lifted the central bank’s base rate to a range of between 3% and 3.25%, and a hawkish outlook on further hikes to come from Chairman Jerome Powell.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.005% higher at 113.196 — a fresh two-decade high — against a basket of its major currency peers, while benchmark 2-year Treasury note yields bumped to 4.274% in overnight trading in anticipation of more Fed rate hikes.
Weakening growth forecasts, however, are putting downward pressure on commodity price at the same time central banks are accelerating their hawkish rhetoric, suggesting investors are adding stagflation risk to their list of near-term concerns for the wobbling global economy.
WTI futures for November delivery were marked 25 cents lower at $78.49 per barrel in overnight trading, while Brent contracts for the same month fell 65 cents to $85.50 each.
Sentiment was further hit by results from Italy’s weekend national elections, which are likely to deliver a majority victory for the right-wing coalition lead by Gorgia Meloni and her Brothers of Italy party.
In Europe, however, the Stoxx 600 was marked only 0.08% lower in early Frankfurt trading while Britain’s FTSE 100, whose major constituents earn the bulk of their revenues outside of the United Kingdom added 0.06%.
On Wall Street, futures contracts tied to the S&P 500 are indicating a 17 point opening bell decline while linked to the Dow Jones Industrial Average are priced for a 132 point dip. Futures tied to the tech-focused Nasdaq are indicating a 33 point move to the downside.
2. — Week Ahead: Fed Inflation Gauge In Focus As Rates Leap
A key reading of the Fed’s preferred inflation gauge Friday will highlight a relatively quiet week for economic data and earnings releases as traders ride out the final days of a brutal September sell-off.
Following a surprisingly hot reading for headline August inflation, which cemented the case for the Fed’s third consecutive 75 basis point rate hike last week, Friday’s PCE Price Index release will be closely-watch for any suggestion of easing price pressures in the core reading.
Fed Chairman Jerome Powell is also slated to deliver opening remarks to a banking conference in St. Louis on Tuesday, at 7:30 am Eastern time, with three of his colleagues — John Williams, Loretta Mester and Lael Brainard — slated to speak on Friday following the PCE data release at 8:30 am Eastern time.
Housing data will also be in focus this week, with new and pending homes sales figures for August released on Tuesday and Wednesday, as well as the July update of the Case-Shiller house price index.
3. — Sterling Crisis Sends Pound to All-Time Low Against the Dollar
The British pound slumped to an all-time low against the U.S. dollar Monday, prompting increased speculation of an emergency rate hike from the Bank of England over the coming days.
Sterling was marked as much as 5% lower against the greenback, extending declines from last week’s currency market rout that followed a ‘mini budget’ statement from finance minister Kwasi Kwarteng that included $80 billion in new borrowing — the largest increase since 1972 — to fund both a planned cap on energy prices over the coming winter and tax cuts for the highest earners in the world’s fifth largest economy.
Money market trading in the U.K. is now pricing in at least another 1.75% in near-term rate hikes from the Bank of England in order to defend the currency — which is now trading at 1.0752 — from sliding to parity against the greenback.
4. — Amazon Follows Target In Early Holiday Sales Kick-Start
Amazon (AMZN) shares edged modestly lower Monday after the world’s biggest online retailer said it would hold an early October shopping event to capture demand from value-focused consumers.
Following a move from Target (TGT) last week to kick-start its holiday sales efforts a week earlier this year, Amazon said it will host a two-day “Prime Early Access Sale” that begins on Tuesday October 12 and will focus on those with memberships to the retailer’ Amazon Prime membership program.
“We are so excited to help Prime members kick off the holiday season with Amazon’s new Prime Early Access Sale,” said Prime vice president Jamil Ghani. “It’s an exclusive opportunity for members to get deep discounts on top brands we know they are looking for this time of year.”
Amazon shares were marked 0.03% lower in pre-market trading to indicate an opening bell price of $113.75 each.
5. — Hurricane Ian Bears Down on Cuba, Headed For Florida Gulf Coast
The National Hurricane Center said Monday that Tropical Storm Ian has accelerated into a hurricane as it makes it way through the western Caribbean with a forecast track to hit the Gulf coast of Florida early this week.
Hurricane Ian is now centered some 90 miles southwest of Grand Cayman island, carrying maximum windspeeds of 75 miles per hour. A Hurricane Watch warning has been issued along the west Florida coast, including the city of Tampa
“A turn toward the north-northeast is forecast on Tuesday night or early Wednesday,” the NHC said in its latest storm update. “On the forecast track, the center of Ian is expected to pass near or west of the Cayman Islands today, and near or over western Cuba tonight and early Tuesday.
“Ian will then emerge over the southeastern Gulf of Mexico on Tuesday, and pass west of the Florida Keys late Tuesday, and approach the west coast of Florida on Wednesday.”