By Geoffrey Smith
Investing.com -- Federal Reserve Chair Jerome Powell testifies on the state of the U.S. economy, his last big appearance before the Fed's next policy-setting meeting. Xi Jinping and his foreign minister, both lash out against U.S. efforts to "contain" China as House Speaker Kevin McCarthy prepares to meet Taiwan leader Tsai Ing-wen and Germany reportedly prepares to ban Huawei and ZTE from parts of its 5G network. Meta is said to be preparing another big round of job cuts, less than four months after the last one. Australia keeps up the global trend of interest rate hikes, and oil prices come off their highs after weak Chinese trade data offsets a price hike by Saudi Arabia. Here's what you need to know in financial markets on Tuesday, 7th March.
1. Powell in Congress
Federal Reserve Chair Jerome Powell heads to Capitol Hill for his semi-annual testimony to Congress, at a time when market expectations for Fed policy are diverging ever more sharply from the Fed's official guidance.
Implied forward rates indicate the market now expects a terminal fed funds rate of some 5.5%, while the Fed's 'dot plot' sees rates peaking at 5.25%. A number of Fed officials have indicated they think the market is right, so the focus will be on whether Powell corroborates that view.
Powell is due to start speaking at 10:00 ET (15:00 GMT)
2. China lashes out at U.S.-led 'containment'
China lashed out at the U.S. for what it called a policy of "all-out encirclement, containment and suppression" that is said will lead to conflict.
At separate events, both President Xi Jinping and foreign minister Qin Yang, both singled out the U.S. for criticism, at a time when the U.S.’s efforts to shake its allies out of their complacency with regard to China appear to be gaining traction: Germany is set to ban telecoms equipment supplier Huawei and telecommunication company ZTE (HK:0763) from parts of its 5G network, according to a Reuters report, while Canada's Prime Minister Justin Trudeau has ordered a fresh investigation into claims of Chinese meddling in Canadian elections.
Fears that the rhetoric could translate into hostile action were highlighted as Taiwanese President Tsai Ing-wen persuaded House Speaker Kevin McCarthy to meet her in the U.S., rather than in Taiwan. A visit by McCarthy's predecessor Nancy Pelosi had enraged Beijing last year.
3. Stocks drift ahead of Powell appearance; Meta reportedly eyes job cuts
U.S. stock markets are in suspended animation ahead of Jerome Powell's appearance before the Senate Banking Committee later.
By 06:25 ET, Dow Jones futures were up 19 points or less than 0.1%, while S&P 500 futures were up 0.2% and Nasdaq 100 futures were up 0.3%.
Nasdaq futures were supported by Meta Platforms (NASDAQ:META) stock, which rose in premarket after Bloomberg reported that it is planning another big round of job cuts less than four months after it shed 13% of its workforce in a bid to restore profitability.
Dick's Sporting Goods (NYSE:DKS) leads the early earnings roster, while cyber-security specialist CrowdStrike (NASDAQ:CRWD) is the biggest name reporting after the close. Danish brewer Carlsberg (CSE:CARLa) is down in Copenhagen, after announcing that its chief executive will step down.
4. Australia hikes again, European data surprise on the upside
There was evidence overnight that other central banks, too, are responding to a better-than-expected show by their economies over the winter.
Bank of England Monetary Policy Committee member Catherine Mann – admittedly one of the MPC's more hawkish members – pressed again for more action after a winter that has passed without the feared energy emergency in the U.K. In related news, U.K. house prices broke their sequence of monthly declines. In the Eurozone, Germany reported stronger-than-expected manufacturing orders for January and revised up December's data to show a bigger increase. Spanish industrial output also surprises to the upside. The big news of the day, however, is a massive wave of strikes in France.
The Reserve Bank of Australia meanwhile raised its cash rate by 25 basis points to a 10-year high of 3.6%, but the Aussie fell as the market bet that the RBA may pause before hiking again.
5. Oil falls on weak Chinese trade data; API due
Crude oil prices came off overnight highs after trade data from China showed imports running below expectations, and down 1.3% from a year earlier over the first two months of 2023.
By 06:45 ET, U.S. crude futures were down 0.7% at $79.92 a barrel, while Brent was down 0.7% at $85.61 a barrel.
Prices had earlier risen in response to Saudi Arabia raising its official selling prices for April by some 50c, a move that reflects confidence that the ongoing recovery will gradually tighten the market over the course of the year, squeezing prices higher.
U.S. inventory data from the American Petroleum Institute are due at 16:30 ET, as usual. Analysts expect a pause in the recent string of increases in domestic stockpiles.