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Fed Minutes, Johnson Jeopardy, Amazon Grubhub Stake - What's Moving Markets

Economy Jul 06, 2022 12:06
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© Reuters

By Geoffrey Smith 

Investing.com -- The Federal Reserve releases the minutes of its last meeting, while New York Fed President John Williams will provide more up-to-date commentary on the state of the inflation debate. Boris Johnson's time as U.K. Prime Minister appears to be running out after yet another scandal, while the euro plumbs a new 20-year low on the back of weak German manufacturing orders. Voyager Digital files for Chapter 11 bankruptcy protection, despite getting a $200 million lifeline from FTX owner Sam Bankman-Fried only two weeks ago, and oil stabilizes below $100 a barrel after its worst day in two years. Uber and DoorDash fall in premarket on the news that Amazon is to take a stake in Grubhub. Here's what you need to know in financial markets on Wednesday, 6th July.

1. Fed minutes, ISM non-manufacturing PMI due

The Federal Reserve will publish the minutes of its last policy meeting, where it announced the largest increase in interest rates in nearly 30 years after telling markets that it planned a more moderate outcome.

The minutes, while backward-looking, will cast some light on whether any policymakers are already getting cold feet about a policy tightening cycle which looks more and more likely to tip the economy into recession. More up-to-date thinking will also be on offer when New York Fed President John Williams speaks at 9 AM ET.

The data calendar also cranks up again after the long weekend, with weekly mortgage applications due at 7 AM ET and ISM’s non-manufacturing survey and the Labor Department’s Job Openings survey at 10 AM.

2. Crypto platform Voyager files for Chapter 11

Crypto investment platform Voyager Digital filed for Chapter 11 bankruptcy protection, after suffering catastrophic losses of over $650 million to the collapsed hedge fund 3 Arrows Capital.

Voyager, whose home page still advertises token-based annual returns of over 12% “with no lockups,” had halted customer withdrawals less than two weeks ago.

Voyager said it has over $110 million of its own cash and another $350 million in reserves held for clients. It also claims the equivalent of over $1.3 billion in crypto assets on its platform.

How much of this can be salvaged remains unclear. However, one major creditor that stands to lose money is Alameda Research, the hedge fund of FTX owner Sam Bankman-Fried. Voyager had already drawn down $75 million of the $200 million credit facility it agreed with Alameda in June.

The news didn’t stop a broad bounce in crypto assets, with Bitcoin gaining 2.1% to trade above $20,000 again and Ethereum gaining 1.3%. Elsewhere, there were tentative signs of improvement in the liquidity situation as Hong Kong-based AEX crypto platform relaxed its restrictions on more token withdrawals.

3. Stocks set to open flat; Amazon threatens delivery dominance of Uber, Doordash

U.S. stocks are set to open flat later, showing exaggerated caution ahead of the day’s data and the earnings season that starts next week.

By 6:15 AM ET, Dow Jones futures, S&P 500 futures, and Nasdaq 100 futures were all down by less than 0.1%, having had mixed fortunes on their first day after the July 4 weekend.

Stocks likely to be in focus later include food delivery apps after Amazon (NASDAQ:AMZN) agreed to buy a 2% stake in Grubhub from Just Eat Takeaway (AS:TKWY), with an option to raise its stake to 15%. The prospect of having to compete with the deep-pocketed e-commerce giant hit Uber (NYSE:UBER) and DoorDash (NYSE:DASH) in premarket, with Uber stock falling 1.8% and DoorDash falling 5.2%.

Also likely to be in focus will be oil and gas names after the 10% drop in crude prices in response to recession fears on Tuesday.

4. Johnson left dangling by key resignations

Boris Johnson’s time as U.K. Prime Minister appears to be running out.

Two senior ministers – Treasury chief Rishi Sunak and Health Secretary Sajid Javid – both resigned on Tuesday in exasperation at the latest episode to have exposed Johnson’s elastic relationship with truth, after the PM was forced to admit that he did in fact know about allegations of sexual impropriety by a man whom he nonetheless promoted to Deputy Chief Whip.

Sterling edged lower after plummeting to a new two-year low against the dollar on Tuesday as events unfolded. Critically for markets, Sunak’s replacement as Chancellor of the Exchequer, Nadhim Zahawi, indicated on BBC Radio Wednesday morning that he was more open than Sunak to the idea of cutting taxes, even at the risk of running higher budget deficits.

By 5:55 AM ET, GBP/USD was down 0.1% at $1.1944 and GBP/EUR was up 0.3% at $1.1679. The euro in turn hit a fresh 20-year low after May’s German manufacturing orders and Eurozone retail sales both pointed to ongoing weakness in the Eurozone.

5. Oil stabilizes after China, recession fears drive selloff

Crude oil prices stabilized below $100 a barrel after Tuesday’s downward lurch, its biggest one-day selloff in over two years.

By 6:25 AM ET, U.S. crude futures were up 0.2% at $99.74 a barrel, while Brent crude was up 0.9% at $103.70 a barrel.

Prices had fallen heavily in response to growing fears of a recession across much of the world. Such fears are being stoked in turn by a sustained and painful rise in gas and electricity prices, especially in Europe, which now has to deal with lower expected nuclear output as well as a cut in Russian gas supplies.

Fed Minutes, Johnson Jeopardy, Amazon Grubhub Stake - What's Moving Markets
 

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