US economic indicators worsen, but reporting season keeps indices from falling

The Fed is having its monetary policy meeting today, where the US central bank will once again raise interest rates. The market has a 77.5% chance of a 75bp hike and a 22.5% chance of a 100bp increase. The Fed is not likely to go against the market, so there is a 0.75% chance of a rate hike. But it is also necessary to be prepared for surprises. The main focus of the market will also be concentrated on the speech of the head of the Fed – Jerome Powell. Mr. Powell will talk about the Fed plans for the future, which will be the basis for the key assets pricing.

Such companies as Meta Platforms (META), T-Mobile US (TMUS), Qualcomm (QCOM), Bristol-Myers Squibb (BMY), Boeing (BA), ADP (ADP), Airbus Group NV (EADSY), Ford Motor (F), Shopify Inc (SHOP) and others will report today. Deutsche Bank analysts said weak Q2 company reports are already “priced in,” so there is a high probability that the market will rise on the publication facts. Optimistic reports from Alphabet (GOOGL) and Microsoft (MSFT) eased investor fears about the bleak economic outlook. More than three-quarters of the firms that have reported earnings so far have either beaten expectations or met them, providing some hope for investors.

On Monday, Russian energy giant Gazprom, citing instructions from the industry regulator, said that gas flows to Germany through the Nord Stream 1 pipeline will be reduced to 33 million cubic meters per day starting Wednesday, or half of the current flow which was already only 40%. The EDL founder points out that risks associated with Russian gas supplies will lead to record inflation in Europe, causing rates to rise aggressively during the recession.

Oil is getting cheaper as the US sells more reserves amid worsening economic statistics. The White House said it had released about 125 million barrels to make up for a global oil supply shortfall and a spike in fuel prices, which intensified after Russia invaded Ukraine in February.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) fell by 0.16%, Hong Kong’s Hang Seng (HK50) added 1.67%, and Australia’s S&P/ASX 200 (AU200) was up 0.26% on the day. Global Central Bank rate hikes, the war in Ukraine, and sluggish prospects for the Chinese economy are all putting pressure on investor sentiment in the region.

Australia’s Consumer Price Index increased to 6.1% in annual terms. Inflation rose by 1.8% in the last quarter but was below economists’ forecasts. The rise in inflation is mainly due to higher housing costs and automobile fuel prices. Average annual trimmed inflation, which excludes significant price rises and falls, increased by 4.9%, the highest since 2003. New home prices recorded their largest increase since 1999. The price increases continue to be driven by high construction rates combined with persistent shortages of materials and labor. Fuel prices rose for the eighth consecutive quarter.

US President Joe Biden is scheduled to speak with Chinese President Xi Jinping this Thursday about tensions over Taiwan.