By Peter Nurse
Investing.com — Wall Street heads for a positive close to the week, snapping a three-week negative run, ahead of the release of the widely-watched Michigan consumer sentiment index. EU leaders continue their summit amid economic difficulties, Boris Johnson faces political woes in the U.K., and the crude market looks forward to next week’s OPEC+ meeting. Here’s what you need to know in financial markets on Friday, June 24.
1. Investors digest Powell’s comments; Michigan sentiment due
Investors will take this final day of the week to parse through Federal Reserve chairman Jerome Powell’s testimony to Congress, while studying the latest data on the state of the U.S. economy.
Powell made clear the central bank’s commitment to reining in soaring inflation, calling it “unconditional”, even acknowledging that the sharply higher interest rates needed to do so may push up unemployment and increase the risks of a recession.
Economic data due Friday includes new home sales for May, at 10:00 AM ET (1400 GMT), which is expected to show a slight slowdown, and the Michigan consumer sentiment index for June.
Analysts expect the June Michigan number to be 50.2, which would be in line with the previous month. Earlier in the day, the German Ifo business sentiment index dropped in May as rising energy prices and the threat of gas shortages unsettled businesses in Europe’s largest economy, and U.K. consumer confidence dropped to a record low.
2. EU summit continues
The European Union leaders continue their summit Friday, a day after they took the historic decision to grant Ukraine, as well as Moldova, candidate status on the path to membership of the bloc.
With that potentially thorny issue out of the way, the conversation is likely to turn more towards the economic situation the bloc finds itself in, with inflation soaring and the likelihood of a recession rising.
Comments from Luis de Guindos, Vice-President of the ECB, at 09:30 AM ET (1330 GMT), will be carefully studied after the policymakers at the central bank paved the way for an interest rate hike next month.
A poll by Reuters showed all but two of the 55 economists expected the ECB to deliver a quarter-point raise on July 21 to -0.25%, and 50 of 55 expected it to hike its policy rate by 50 basis points in September, taking the deposit rate out of negative territory to 0.25%.
3. Stocks set to open higher; FedEx Impresses
U.S. stock markets are set to open higher Friday, set to record a rare positive week during these turbulent times.
By 06:00 AM ET (1000 GMT), Dow Jones futures were up 215 points, or 0.7%, while S&P 500 futures were up 0.8% and Nasdaq 100 futures were up 1%.
All three cash indices are on course to snap three-week losing streaks, with the blue-chip Dow Jones Industrial Average up 2.6% so far this week, the broad-based S&P 500 3.3% higher and the Nasdaq Composite up 4%.
Stocks likely to be in focus include FedEx (NYSE:FDX), after the transport company, widely regarded as a bellwether of the online shopping and remote economy in general, impressed with its quarterly earnings after the close Thursday. Carnival (NYSE:CCL) will also report its latest quarterly earnings, amid signs summer travel is picking up.
4. Johnson’s leadership in question after U.K. by-election defeats
The problems facing British Prime Minister Boris Johnson are mounting, with his Conservative Party losing two by-elections overnight as voters turned against his party, including a swing of nearly 30% in a previously safe seat in southeast England.
The results prompted Conservative Party co-chairman Oliver Dowden to resign from the role with immediate effect, stating that “someone must take responsibility”, a line which could be seen as a dig at Johnson’s leadership just a few weeks after he survived a vote of no confidence in the wake of the ‘Partygate’ scandal.
Johnson’s political success has been based on his popularity in his party’s heartlands, but these results indicate that may be waning as surging prices, a squeeze on incomes, and disruption from strikes take a toll on the national mood.
Additionally, U.K. retail sales volumes dropped by 0.5% in May, according to data from the Office for National Statistics. The decline was mainly due to slowing food store sales, which fell by 1.6% during the month, a sign that inflation concerns may be taking a bite out of consumer demand.
5. Oil set for weekly fall; OPEC+ meets next week
Crude oil prices rose with risk sentiment on the up Friday, but the market is heading for its first back-to-back weekly loss since early April on fears that aggressive monetary tightening will slow global growth, weighing on demand.
By 06:00 AM ET, U.S. crude futures were up 1.3% at $105.58 a barrel, while Brent crude was up 1.1% at $111.28 a barrel. Both benchmarks are on course for weekly losses of over 2%
Attention will quickly turn to the meeting of the Organization of Petroleum Exporting Countries and allies next week to discuss the group’s production levels.
The cartel, known as OPEC+, is widely expected to stick to its plan to boost output by 648,000 barrels a day in July and by the same amount in August, despite the plans of U.S. President Joe Biden to visit Saudi Arabia, the de facto leader of the group, to plead the case for lower crude prices.