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Wheat Price Surge, Chinese Slump, JetBlue Tender - What's Moving Markets

Economy May 16, 2022 12:36
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By Geoffrey Smith -- Wheat prices shoot to a two-month high after India bans exports, stoking fears of a global food shortage. JetBlue goes hostile in its bid for Spirit. Stocks are set to open lower as fears of low growth and high inflation persist. Vladimir Putin's efforts to stop NATO expansion backfire and China's economy slows further due to lockdowns. Here's what you need to know in financial markets on Monday, 16th May.

1. Wheat prices surge as India bans exports

Wheat prices surged to their highest in over two months on Monday, as India's decision over the weekend to impose an export ban further stoked fears of a global food crisis.

By 5:20 AM ET (0920 GMT), the front-month contract for U.S. Wheat was quoted at $1,231.90, up 4.7%, having stalled earlier just under the $1,250 level.

Indian exports had become an important stopgap source of supply to world markets in the aftermath of Russia's invasion of Ukraine. A lengthy heatwave has wrecked the outlook for this year’s harvest, and the sudden threat to domestic food supply has led the government to revise an initially relaxed approach to exports.

2. JetBlue goes hostile in bid for Spirit

JetBlue launched a tender offer for Spirit Airlines (NYSE:SAVE), going over the heads of Spirit's board to make a direct approach to its shareholders.

JetBlue offered a slightly reduced $30 a share in cash, almost double the airline's closing price on Friday, but said it will be open to paying its first offer price of $33 a share if Spirit provides the data it has requested.  

Spirit's board continues to stick with its recommendation that shareholders accept a merger proposal from Frontier Group (NASDAQ:ULCC), which would arguably face lower antitrust barriers. 

3. Stocks set to open lower; Ford/Rivian eyed

Painful memories of the last few weeks continue to haunt stock markets, and U.S. markets are set to open lower again later, the mood not helped by comments over the weekend from former Goldman Sachs CEO Lloyd Blankfein that the risks of a recession in the U.S. have risen significantly. News that median CEO pay rose to a record $14.7 million last year will also be hard to swallow for some investors now sitting on heavy losses.

By 6:25 AM ET (1025 GMT), Dow Jones futures were down 49 points, or 0.2%, while S&P 500 futures were down 0.3%, and Nasdaq 100 futures were down 0.6%.

A speech by New York Fed President John Williams at 8:55 AM ET stands out in a largely empty data calendar, while the regular quarterly filings of the hedge fund industry will provide some interest with regard to flows. Tower Semiconductor (NASDAQ:TSEM) and Weber (NYSE:WEBR) head an equally sparse earnings calendar. Other stocks likely to be in focus later include Ford (NYSE:F) and Rivian Automotive (NASDAQ:RIVN), after the former announced it had dumped another 7 million of the latter's shares in a filling after the close on Friday.  

Separately, McDonald's (NYSE:MCD) will be in focus after saying it will exit its Russia business.

4. Chinese economy reels again from lockdowns

Three key pieces of Chinese economic data all fell short of expectations in April, underlining the damage done by the extended lockdowns plaguing Shanghai and other big population centers to stamp out COVID-19.

Retail sales fell 11.1% on the year in April, well below the 6.1% drop expected, and are now down 0.2% year-on-year over the first four months of the year. The country's factories fared little better: Industrial production fell 2.9% on the year, compared to expectations that growth would only slow to 0.4%. Growth in fixed-asset investment did stay positive, at least, but slowed to 6.8% from 9.3%.

Chinese assets took the news badly, with the Shanghai Shenzhen CSI 300 index falling 0.8, and the offshore yuan falling 0.2% to 6.8072. The dollar has risen by some 8% against the yuan in the three months since the Omicron variant of COVID-19 forced China to implement its first major lockdowns since the early stages of the pandemic in 2020.

The news didn't stop J.P. Morgan analysts from upgrading a bunch of Chinese tech firms, only weeks after dubbing them 'uninvestable' in a report.

5. Aramco's record profits

Saudi Aramco (TADAWUL:2222) showed why it has displaced Apple (NASDAQ:AAPL) as the world's most valuable company, posting record profit in the first quarter. Net profit rose 82% to $39.5 billion, broadly in line with analyst forecasts, as crude prices surged in the wake of Russia's invasion of Ukraine.

Those factors continue to support prices: Germany said on Monday it's willing to press ahead with an embargo on Russian oil imports even without unanimous support from the rest of the EU. The EU's sixth sanctions package, which would end imports of Russian crude and refined products by the end of the year, has been held up by opposition from Hungary and other member states in central and eastern Europe.

By 6:35 AM ET, U.S. crude prices were nonetheless down 0.5% at $108.20 a barrel, largely in response to the Chinese data, while Brent crude was down 0.5% at $110.97. A cautious outlook from Europe's biggest discount flyer Ryanair (NASDAQ:RYAAY) also kept bulls in check.

Wheat Price Surge, Chinese Slump, JetBlue Tender - What's Moving Markets

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