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Early Morning Call: Indices lower; copper falls; oil down

Europe expected little moved; Asia mostly up following gains on Wall Street despite Powell warning of potential US recession. Copper at Feb 2021 levels on demand concerns; oil holding Wednesday’s losses.

Recession fears

Recession fears are very much in investors’ minds.

After a rather volatile start of the session, Japan’s Nikkei ended the day on modest gains.

Yesterday in the US, the S&P 500 fell by 0.13%, the Dow Jones and Nasdaq ended 0.15% lower. The US dollar has been losing ground overnight, particularly against the yen and the Australian dollar.

European outlook

In Europe indices opened lower, after having ended yesterday’s session in negative territory.

Today markets will remain attentive to the second part of Federal Reserve (Fed) chair, Jerome Powell’s testimony to Capitol Hill. Yesterday, Powell told the Senate banking committee that a US recession is "certainly a possibility" and warned that avoiding a downturn now largely depends on factors outside the Fed's control, this being, mainly energy prices.

The market is also waiting for the Fed's banks stress test results. Established following the 2007-2009 financial crisis, the Fed tests banks' balance sheets against a hypothetical severe economic downturn, the elements of which change annually.

Large US banks are optimistic they will receive a clean bill of health. But, more importantly, this exercise will reveal just how much cash they can return to shareholders in the form of dividends and share buybacks.

Outside of the Fed, investors will be attentive to purchasing managers’ index (PMI) data published throughout the day, that should give them clues as to the persistence of elevated inflation rates and the resilience of economic growth in the face of current headwinds.


Elsewhere on the commodity market, copper is down to a 16-month low, as recession fears are being priced in, and took mining stocks in its wake. BHP Group now trades at a six-month low.

Oil prices have also been severely dented, now trading at a six-week low. A drop accentuated by the latest API data which revealed the biggest weekly increase in crude stocks since February.

US President Joe Biden called for a three-month suspension of the 18.4c federal gasoline tax, but met the opposition from lawmakers who expressed concerns that oil companies and retailers may pocket much of the savings.

Today Biden will meet major oil companies to not only ensure that they pass gas tax savings on to consumers, but also to ask them what can be done to increase the supply and lower the cost of gasoline.


Very little is scheduled on the equities front.

Tonight after the US closing bell, FedEx is expected to report an increase in quarterly earnings and sales. But, guidance will be key as the group continues to struggle with labour issues and costs at its low-cost delivery unit.

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