Powell in the Hole, Personal Spending, U.K. Energy Prices - What's Moving Markets

By Geoffrey Smith

Investing.com -- Federal Reserve Chairman Jerome Powell makes his long-awaited keynote speech at the annual symposium in Jackson Hole. The U.S. will present data for personal income and spending, as well as the price data for July that the Fed really cares about. Europe's energy prices continue to go ballistic, and Elon Musk gets a partial victory in his fight with Twitter. Here's what you need to know in financial markets on Friday, 26th August.

1. Powell at Jackson Hole

The event that has hung over markets all week finally arrives, as Chair Jerome Powell delivers his keynote speech at the Federal Reserve’s annual central banking symposium in Jackson Hole.

Top of the agenda is how Powell will steer expectations for the Fed’s September policy meeting, a task made harder by the Fed’s decision in the summer to raise rates by 75 basis points rather than the 50 it guided for. The market is currently split between expecting a hike of half a point or 75 basis points, meaning that an abrupt market reaction is likely whatever Powell flags.

Powell is due to speak at 10:00 ET (14:00 GMT).

2. Personal spending, Michigan consumer sentiment due

The U.S. will also release some data of key concern to the Fed in the course of the morning. At 08:30 ET, there will be figures on personal income and spending for July, along with the price indices for personal consumer expenditures.

PCE prices are the Fed’s favored measure of inflation because they more accurately reflect U.S. consumers’ spending patterns, especially those of lower-income consumers for whom the effects of inflation tend to be worse.

At 10:00 ET, the University of Michigan publishes its final estimate of U.S. consumer sentiment in August, where the one- and five-year inflation expectations components will get their usual high degree of scrutiny.

3. Stocks marking time but late Thursday's earnings support; HP's earnings due

U.S. stock markets are marking time before the day’s big event, trimming Thursday’s gains.

By 06:15 ET, Dow Jones futures were down 71 points, or 0.2%, while S&P 500 futures were down 0.3%, and Nasdaq 100 futures were down 0.5%.

Sentiment is being underpinned by better-than-expected results and guidance after the bell on Thursday from Workday (NASDAQ:WDAY), Ulta Beauty (NASDAQ:ULTA) and – for once – Gap (NYSE:GPS).

HP (NYSE:HPQ) and JinkoSolar (NYSE:JKS) head a thin lineup for earnings on Friday.

Elsewhere, Twitter (NYSE:TWTR) stock is coming under a little pressure again after a judge ordered the company to hand over some of its internal discussions on spam accounts to Elon Musk, while denying his "absurdly broad" request for almost all of its user data.

4. Europe's energy crisis just gets worse

U.K. households are set to pay three times as much for energy in the coming winter as they did over the last one.

The U.K.’s energy regulator Ofgem raised the annual cap on typical ‘dual-fuel’ bills to 3,549 pounds ($4,188) a year from October 1st, reflecting the steep rise in wholesale energy prices over the summer. There’ll be worse to come in January with the next review. Citigroup estimated earlier this week that the rise in fuel bills if unabated by government action, will drive inflation to as high as 18%. The pound weakened again, testing the 47-year low that it hit in 2020.

Nor is there any sign of relief on the European continent yet: German baseload power prices for 2023 hit a new record of over 800 euros a megawatt-hour – something that will take the cost of a single washing machine cycle to around 15 euros, according to some estimates. In related news, German consumer confidence plunged to a record low.

5. Oil rises as OPEC lines up behind Saudi output cut warnings

Crude oil prices rose again as a raft of OPEC members rallied behind Saudi Arabia’s message that the cartel might want to cut oil production. Energy Minister Prince Abdulaziz had warned in interviews that the weakness of futures prices in recent weeks failed to reflect the ongoing tightness of the physical market.

The U.S. gasoline market is also facing a temporary squeeze from the closure of a BP (NYSE:BP) refinery in the Midwest after a fire.

By 06:30 ET, U.S. crude futures were up 1.2% at $93.67 a barrel, while Brent futures were up 1.5% at $100.85 a barrel.

Baker Hughes’ rig count and the CFTC’s positioning data round off the week, as usual.