By Peter Nurse
Investing.com -- China eases monetary policy once more, Europe suffers from more gas supply worries, while an Iranian nuclear deal could be on the verge of being agreed upon, weighing on the price of oil. U.S. stocks are set to open sharply lower, and Tesla lifts the price of its advanced driver assistance system. Here's what you need to know in financial markets on Monday, August 22.
1. China steps up easing
Beijing is clearly worried about the slowdown in the Chinese economy.
The People’s Bank of China lowered its one-year loan prime rate by 5 basis points to 3.65% at the central bank's monthly fixing on Monday, while the five-year LPR was cut by 15 basis points to 4.30%.
This followed last week’s surprise decision to lower two other benchmark interest rates.
China's economy, the world's second-biggest, narrowly avoided contracting in the second quarter, but widespread COVID-19 lockdowns and a property crisis are weighing heavily on consumer and corporate confidence.
Influential investment bank Goldman Sachs last week cut its full-year GDP growth forecast for China to 3.0% from 3.3% previously, far below Beijing's official target of around 5.5%.
2. Gas stoppage to exacerbate European energy concerns
Europe’s energy woes intensified after Gazprom (MCX:GAZP) announced late Friday it will stop delivering natural gas to Europe through its main pipeline for three days at the end of the month, further squeezing energy supplies.
This resulted in the Dutch front-month gas contract, the European benchmark, soaring 11% higher to 270.98 euros a megawatt-hour, up further from Friday’s record closing high.
The supply of gas through this pipeline has been the subject of much concern for weeks after Gazprom closed the flow down for maintenance work last month. It had subsequently resumed at just 20% of capacity, and European authorities have repeatedly warned of the possibility of a complete shutdown as the Kremlin retaliates for sanctions imposed because of its war in Ukraine.
Many European countries, and Germany in particular, are struggling to fill storage sites ahead of winter, and have been urgently seeking out alternative sources of power.
3. Stocks set to drop; Palo Alto, Zoom to report
U.S. stock markets are set to open sharply lower Monday, with investors nervous ahead of the Federal Reserve’s eagerly-awaited Jackson Hole economic symposium.
By 06:00 ET (10:00 GMT), Dow Jones futures were down 300 points, or 0.9%, S&P 500 futures were down 1.2%, and Nasdaq 100 futures were down 1.5%.
The main Wall Street indices all closed lower Friday, halting the summer rally on fears that the recent hawkish tone from a number of Fed policymakers will translate into the continuation of more aggressive interest rate hikes, potentially with another 75-basis-point increase in September.
The blue-chip Dow Jones Industrial Average dropped almost 300 points, or 0.9%, on Friday, the broad-based S&P 500 fell 1.3%, and tech-heavy Nasdaq Composite closed 2% lower.
Fed Chairman Jay Powell is set to speak in Jackson Hole, Wyoming on Friday, and investors will be looking for possible answers about how high U.S. interest rates may go and how long they will need to stay at elevated levels to bring inflation back under control.
On a corporate note, Palo Alto Networks (NASDAQ:PANW) and Zoom Video Communications (NASDAQ:ZM) are set to report results after the bell Monday, while Tesla (NASDAQ:TSLA) will also be in the spotlight after lifting the cost of its advanced driver assistance system [see below].
4. Tesla lifts premium driver assistance system price
The price of Tesla’s Full-Self Driving system, its top-level driver assistance program, is set to rise by 25% to $15,000 from $12,000 in September, CEO Elon Musk said, in a tweet on Sunday.
Tesla’s advanced driver assistance system has a feature called “Navigate on Autopilot”, which is intended to let Tesla cars automatically detect and slow down for traffic signs and signals; navigate from highway on-ramp to off-ramp while engaging turn signals; make lane changes and take exits.
Since 2016, the NHTSA has opened 38 probes into collisions, including 19 fatalities, that involved a Tesla vehicle where driver assistance systems including Autopilot and more advanced systems were thought to be a factor.
5. Iran nuclear deal ‘imminent’
Oil prices weakened Monday on reports indicating that a deal reviving a nuclear agreement between Iran and the Western powers was close to being signed off.
Qatar news organization Al Jazeera reported over the weekend that such a deal was ‘imminent’, while the White House confirmed that the leaders of the United States, Britain, France, and Germany discussed the plans over the weekend.
These fraught negotiations have lasted for more than a year and the market may be getting ahead of itself, especially after Iran's Foreign Ministry spokesman on Monday accused the United States of "procrastinating".
However, an agreement could result in the release of over 1 million barrels of oil per day of supply into the market if the sanctions on Iranian oil are pulled.
By 06:00 ET, U.S. crude futures were down 0.6% at $89.84 a barrel, while Brent crude was down 0.75% at $96.27 a barrel.