By Geoffrey Smith
Investing.com -- President Joe Biden will make his mind up on whether to stick or twist at the top of the Fed by the end of the week. He's also agreed to talk to President Xi Jinping about nuclear weapons, which would be a new dimension in the U.S.-China bilateral relationship. Retail sector earnings continue with Target (NYSE:TGT), Lowe's and TJX (NYSE:TJX) all reporting. Sterling jumps as strong inflation data put a rate hike in December squarely on the table, and Amazon (NASDAQ:AMZN) faces down Visa (NYSE:V) over a recent hike in fees. Here's what you need to know in financial markets on Wednesday, 17th November.
1. A Two-Horse Race
President Joe Biden told reporters he will decide by the end of the week whether or not to reappoint Jerome Powell as chair of the Federal Reserve. The announcement may not come until next week, however, according to Bloomberg.
Reports indicate that Powell’s only rival for the job is Fed Governor Lael Brainard. Given Brainard’s already strong influence on Fed policy, a high degree of continuity looks likely whichever way the choice falls.
The decision comes as the dollar hits fresh 16-month highs on the foreign exchange markets. Stronger-than-expected retail sales and industrial output in October on Tuesday prompted fresh bets on the Fed accelerating the phase-out of its asset purchases and raising interest rates by the middle of next year.
2. Xi, Biden to hold nuclear talks
More details emerged of the telephone conversation between Presidents Joe Biden and Xi Jinping, fleshing out the vaguely positive tone that both sides struck after the call on Monday.
The two countries have agreed to hold talks on their nuclear arsenals, after discussing the need for “strategic stability” on their call. The move suggests that China, which recently tested a ‘hypersonic’ missile delivery system, is being taken more seriously as a nuclear threat by the U.S.
The two leaders also reportedly discussed coordinated action in releasing strategic oil reserves to bring down prices.
3. Stocks set to open mixed; Amazon fires a warning shot against Visa
U.S. stocks are set to open mixed later on another busy day for retail earnings. Lowe’s (NYSE:LOW) has already started the ball rolling with a handy beat on profit. TJX and Target will follow before the market opens, while chipmaker Nvidia (NASDAQ:NVDA) leads the late reporters.
By 6:15 AM ET (1115 GMT), Dow Jones futures were down 29 points, or less than 0.1%, while S&P 500 futures were down by a similar amount. Nasdaq 100 futures were up by less than 0.1%.
Other stocks likely to be in focus include credit card and payments names, after Amazon faced down Visa over its efforts to raise fees in the U.K. after Brexit. The e-commerce giant said it will no longer accept Visa cards issued in the U.K., implying that there are plenty of alternative payment options around these days.
4. U.K. rate hike back on the cards
Sterling jumped after U.K. inflation data put a rate hike at the Bank of England’s next meeting in December firmly back on the table.
New data showed broad and strong inflationary pressure across both consumer and producer prices in the U.K. in October, with both the headline and ‘core’ CPI readings hitting their highest in 10 years at 4.2% and 3.4%, respectively. Both were above expectations, as was the 8.0% rise in U.K. producer prices, which was the highest since 2008.
Soaring prices for fuel, gas and electricity were the chief culprit, and the chance of a major improvement there in the near term has shrunk after Germany’s regulator indicated that there will be no gas imports through the new Nord Stream 2 pipeline this winter owing to what it said were procedural issues.
Similarly strong inflation numbers in the Eurozone did nothing to support the euro, however, after strong signalling by the European Central Bank that it is still far from tightening policy in response.
5. Oil down after mixed API report and signs of Covid spread; EIA eyed
Oil prices are testing a seven-week low after a weak-looking inventory report from the American Petroleum Institute and further reports of Covid-related clampdowns in Europe as the northern hemisphere heads into winter.
Germany’s government is to discuss introducing a lockdown for the unvaccinated, mimicking rules introduced by neighboring Austria at the weekend. Ireland’s government, meanwhile, recommended that all those who can work from home do so, in an effort to bring down rising hospitalization rates.
By 6:30 AM ET, U.S. crude futures were down 1.3% at $78.79 a barrel, while Brent crude futures were down 1.2% at $81.43 a barrel. The U.S. government’s inventory data are due at 10:30 AM ET as usual