By Geoffrey Smith
Investing.com -- Disney earnings blow past expectations and dating site Bumble soars on its debut. The Democrats push ahead with their $15 minimum wage proposal, while the British economy shrinks the most in 300 years. Oil is finally responding to some OPEC caution on the demand outlook. Here's what you need to know in financial markets on Friday, February 12th.
1. Minimum wage proposal on the table
House Speaker Nancy Pelosi said the Democrats’ proposal for a $15 minimum wage will be in the final draft of the stimulus package when the House debates it.
The proposal, if implemented, could have far-reaching impacts on the structure of consumer spending in the U.S., along with risks to low-wage employment.
The Congressional Budget Office said earlier this week that the measure could cost 1.4 million jobs, but lift 900,000 out of poverty. It would give pay raises to an estimated 27 million people, over 10% of the U.S. workforce.
Elsewhere in Washington, Donald Trump’s defense lawyers will present their case after Democratic prosecutors rested on Thursday. There appears little likelihood that the former President will be convicted.
2. U.K. GDP shrinks most in 300 years
The British economy contracted by the most in over 300 years last year due to a combination of the pandemic and slowing business investment due to the Brexit situation. Gross domestic product shrank 7.8%. Amazingly, that’s actually better than many expected – the consensus was for -8.1%.
Quarterly growth of 1% through December means the country is likely to escape a technical recession, defined as two straight quarters of contraction. The U.K. has advanced further than most in vaccinating its population, but concerns about the effectiveness of vaccines against new strains of the virus are frustrating hopes for an early release from lockdown.
Prime Minister Boris Johnson will present a roadmap for the way out of lockdown on February 22nd, under pressure from his own party to ensure that schools reopen in early March, as promised. The pound fell 0.2% against the dollar but was on course to end the week with a modest gain, close to a 34-month high.
3. Stocks set to retreat: Bumble soars, Disney roars
U.S. stocks are set to open with light profit-taking at the end of another broadly positive week, punctuated by bursts of retail investor frenzy.
By 6:35 AM ET (1135 GMT), Dow Jones futures were down 73 points, or 0.2%, while S&P 500 futures were down 0.3% and NASDAQ Futures were down 0.2%.
The spike in pot stocks earlier this week continued to unwind on Thursday, but that was overshadowed by the stunning market debut of dating site Bumble (NASDAQ:BMBL). Bumble, which had revenue of $126 million last year, rose 64% to close its first day with a market value of $7.7 billion.
Another stock likely to be in focus later is Walt Disney (NYSE:DIS), which blew past expectations in its most recent quarter, adding over 8 million subscribers to its Disney+ streaming channel. The stock was up 2.2% in premarket trading at a new record high.
On the data front Friday, New York Federal Reserve President John Williams (NYSE:WMB) will speak at 10 AM ET (1500 GMT) and may touch upon the issue of asset prices and financial stability. The Michigan Consumer Sentiment index is also due at the same time.
4. Ruble falls as EU links sour
The Russian ruble fell after Foreign Minister Sergey Lavrov said the country was ready to break off diplomatic relations with the European Union.
The EU’s top diplomat, Josep Borrell, had said on Thursday that the bloc needed to impose fresh sanctions on Russia in response to its violent crackdown on protests in support of jailed opposition leader Navalny. Navalny’s recent viral expose of a luxurious palace built for President Vladimir Putin on the Black Sea Coast has inflamed anti-regime opinion, especially among younger voters.
Earlier, the Central Bank of Russia left its key rate at 4.25%, as expected, in the latest sign that emerging market central banks are starting to get more cautious about reviving inflation.
Elsewhere in Europe, Italy's Five Stars Movement said it, too, will back the new government of former European Central Bank President Mario Draghi, meaning that Draghi now has support of all the major parties - for now.
5. Oil correction continues
Another factor weakening the ruble was a further correction in oil prices, where bulls were relatively slow to take on board to cautious reports on the outlook for the global market from the International Energy Agency and the Organization of Petroleum Exporting Countries on Thursday.
By 6:35 AM ET, U.S. crude futures were down 0.9% at $57.73 a barrel, while Brent crude futures were down 0.7% at $60.70 a barrel.
The ending of a strike by Libyan port guards has removed one artificial support to the market by allowing exports to return to their normal level. Baker Hughes’ weekly rig count and the Commodity Futures Trading Commission’s data on positioning round off the week’s events.