Brace for another U.S. data dump, a day after weak retail sales and industrial production numbers forced markets to reappraise the risk of a recession. The Philadelphia Federal Reserve’s manufacturing index, weekly jobless claims, and December’s housing starts and building permits may all have the potential to shock (or reassure). Procter & Gamble earnings will also act as a cross-check on the strength of the consumer. Alcoa has already set a bleak tone for industry, meanwhile. The denouement of the latest big crypto mess approaches, as Genesis is reported to be planning a filing for chapter 11 bankruptcy. And oil slumps as another big jump in U.S. inventories counteracts the China-inspired bullishness of earlier in the week. Here’s what you need to know in financial markets on Thursday, 19th January.
1. Incoming! Another dump of weak data looms
Another dump of U.S. economic data is set to follow hard on the heels of the numbers that sent stock markets reeling on Wednesday.
Of most importance is arguably the Philadelphia Fed’s manufacturing survey, which may corroborate the alarming lurch downward in the Empire State Manufacturing index earlier in the week and December’s bigger-than-expected drop in industrial production.
By contrast, December’s housing starts are likely, at worst, only to confirm a familiar downward trend. Even so, the negative mood that dominated after Wednesday’s triple whammy will make it harder for weekly jobless claims to fulfill their usual role as palliative. Bad news, it seems, is now bad news again.
2. Genesis reportedly prepares to file for bankruptcy
After hanging in the air for two months, the next big shoe in the crypto universe is finally set to drop. Genesis, the lending arm of Barry Silbert’s Digital Currency Group, is reported by Bloomberg and others to be planning to file for chapter 11 bankruptcy protection as early as this week.
The move will formally put the customers of investment platform Gemini’s own lending operation, Earn, into line with Genesis’ other creditors. Who gets paid first will be up to the court administering the procedure.
Gemini owners Tyler and Cameron Winklevoss say Genesis owes Earn customers $900 million.
The Block reported that Silbert is offering Genesis creditors deferred cash payments and equity in the DCG parent group as part of a package to restructure Genesis’ debts. It’s not clear what chance this plan has of succeeding.
3. Stocks set to extend losses at open; P&G earnings key, while Alcoa disappoints
U.S. stock markets are set to extend losses at the opening later, as Wednesday’s barrage of data forces investors to reassess the risk of a sharp earnings recession this year.
By 06:25 ET, Dow Jones futures were down 241 points at a two-week low, while S&P 500 futures were down 0.8%, and Nasdaq 100 futures were down 0.9%. The three main cash indices had all lost between 1.5% and 2% on Wednesday after December’s retail sales, manufacturing output, and producer price inflation all came in weaker than expected.
Procter & Gamble (NYSE:PG) earnings, due early, will offer a cross-check on the strength of U.S. consumer spending, given the breadth of its product mix, while the slowing industrial outlook is also reflected in Alcoa’s (NYSE:AA) performance in premarket, after it reported lower-than-expected earnings amid weak pricing for aluminum and alumina.
4. Strikes, strikes, strikes in Europe
Europe’s winter of discontent reached new highs on Thursday, as millions of French workers walked out in protest at President Emmanuel Macron’s proposals to raise the retirement age from 62 years to 64.
In addition to trains, schools, and local government, workers are also striking at the country’s refineries, which is likely to have indirect impacts not just on French productivity this month but on inflation too.
In the U.K. meanwhile, health unions said that ambulance staff will strike four more times over the next three months, while talks between the government and unions to head off more strikes by train drivers and teachers also failed to make any headway.
5. Oil slumps on weaker demand outlook; EIA set for another rise in U.S. inventories
Crude oil prices reversed all of the week’s gains in response to the U.S. data on Wednesday, which put the outlook for demand from the world’s largest economy into a whole new light.
Prices were also depressed by new estimates from the International Energy Agency suggesting that Russia is still pumping at around 11M barrels a day, despite the increasingly steep discounts that it is being forced to accept for its benchmark export blend, Urals.
Energy Intelligence reported that one cargo of Urals was bought for $37.90 a barrel in the last few days, a reflection of the absence of buyers for it in the West.
The U.S. government’s weekly inventory data are due at 11:00 ET, a day later than usual due to the Martin Luther King day holiday. The American Petroleum Institutereported another 7.6M barrel jump in crude stocks last week, bringing the total increase over the last three weeks to 25M barrels.