Powell’s speech, oil companies and Porsche’s IPO attempt

© Reuters

By Scott Kanowski

Investing.com — Investors are heeding comments from the Federal Reserve’s top policymaker and several other global central bankers, who pledge to contain runaway inflation, even if it slows economic growth. The US is gearing up for another key monthly jobs report later this week and how that number might play into the Fed’s monetary policy calculation. Oil prices are rising, Bitcoin’s latest sub-$20,000 spell continues, and preliminary steps to list Porsche are reportedly underway. Here’s what you need to know in the financial markets this Monday, August 29.

1. Difficult talks in Jackson Hole

Federal Reserve Chairman Jerome Powell delivered his long-awaited keynote address at the Jackson Hole central bank’s annual symposium on Friday and, at least according to ING analysts (AS:), he “has did what he had to do”. This task consisted mainly of a commitment to keep pushing interest rates higher in order to stem the rise in consumer prices, despite the potential “pain” for households and businesses from a subsequent fall in the growth. . ING particularly praised Powell for not pledging to treat the markets “soft” in his bid to bring down inflation.

At the same time, European Central Bank officials warned that a “sacrifice” would be needed to stem price pressures. ECB executive board member Isabel Schnabel and Banque de France governor Francois Villeroy de Galhau both added that monetary policy in the eurozone would remain restrictive for the foreseeable future. Traders will get a glimpse of the impact of the ECB’s recent borrowing cost hikes when the latest Eurozone inflation data is released on Wednesday this week.

2. Key data to come

The fallout from Powell’s comments continued on Monday, with Asian and European markets slipping into the red. In the US, index futures , and are all down, adding to a tough Friday session that saw Wall Street’s three major indices lose between 3% and 4%.

At the same time, the yield, very sensitive to short-term interest rate expectations, reached 3.4890%, a level not seen since 2007. The yield also jumped to 3.114% .

Attention now shifts to US data for which it will be released on Friday. The previous labor market report showed an unexpected acceleration in job growth in July, and any further gains could give the Fed even more reason to maintain its current pace of monetary policy tightening.

3. Oil prices are firming up

Despite Jackson Hole’s gloomy economic outlook, oil prices continued their gains of the past week on Monday. Trading in London was up 0.59% at $99.49 a barrel, while the US was up 0.64% at $93.66 at 1:25 p.m.

Much of that increase is due to the Organization of the Petroleum Exporting Countries and its allies — known as OPEC+ — pledging to cut supply to help stabilize crude prices. Saudi Arabia, which effectively leads OPEC+, also said last week it would cut production.

The reduction in supply would also offset a possible lifting of US sanctions against Iran, which would then release a large amount of fresh crude into the market.

At the same time, recent data suggests that oil demand in some economies may start to recover. The United States exported oil at a record high earlier this month, while U.S. crude inventories also fell at a faster than expected pace over the past two weeks.

European demand for crude is also expected to rise this year, as the bloc weans itself off imports of Russian natural gas. The rise in natural gas prices should therefore encourage the use of more crude oil for heating.

4. Those under $20,000

The fallout from Powell’s speech was felt in cryptocurrencies, with fears of potential economic decline dampening interest in riskier assets. The is now trading below $20,000 for the first time since mid-July, as the digital token fell 0.89% on Monday to $19,818.8.

The $20,000 level is seen by many analysts as potential support for bitcoin, although some have warned that the actual bottom could be even lower.

The crash also ended a short rally in August that sent the price of bitcoin to over $25,000. This surge has been halted by rising expectations from the Federal Reserve and other central banks, which are predicting sharp interest rate hikes.

Bitcoin has now lost around a fifth of its value since August 15.

5. The IPO of Porsche is preparing?

The first steps in the long road to Porsche’s highly anticipated IPO are expected in the coming days, according to a Reuters report citing six people familiar with the matter. The boards of parent Volkswagen Group (ETR:) and major Porsche shareholder Porsche SE (F:) may soon issue a recommendation on the IPO, which would then be sent to the boards of both companies for approval.

This recommendation would then be forwarded to the boards of directors of both companies for approval, which would lead to an official announcement of the IPO as early as the first week of September, although no decision has yet been officially made.

Executives may struggle to convince potential investors to back the luxury car brand. Only 12.5% ​​of the shares of Porsche AG will be available on the open market, which will limit the impact that a stake could have on the decisions of the board of directors. At the same time, inflationary fears and less gloomy growth prospects – not to mention the impact of the war in Ukraine on Europe’s gas supply this winter – have raised health questions. the future of the whole VW group.

Indeed, Reuters reports that VW could forgo the IPO if it fails to muster enough applications.

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