Here are five things you must know for Monday, September 19:
1. — Stock Futures Slump On Rate Hike, Recession Worries
US equity futures moved lower Monday, following on from their biggest weekly decline in three months, as investors braced for a key Federal Reserve rate decision that is likely to be echoed by major central banks in Europe and Asia.
While investors have long-anticipated another jumbo rate hike from the Fed this week, and particularly after a hotter-than-expected August inflation report, growing concern over the impact of central bank tightening on the broader global economy has added a new dimension to this week’s slate of rate decisions.
The Bank of England, which delayed last week’s policy meeting amid the nation’s mourning for Queen Elizabeth II, will meet Thursday, as will the Bank of Japan and the Swiss National Bank.
The World Bank urged policymakers last week to “shift their focus from reducing consumption to boosting production” amid concerns that faster rate hikes could tip the global economy into recession, while Goldman Sachs trimmed its 2023 US growth forecast — to 1.1% from 1.5% — citing tighter Fed policy and a leap in headline unemployment.
At present, the CME Group’s FedWatch suggests an 80% chance of a 75 basis point rate hike on Wednesday, the third in succession, with a near 50/50 chance of the Fed raising its target rate to between 4.5% and 4.75% by the end of February.
Bond markets continue to flash concerned recession warnings, with the difference between 2-year note yields — which are trading at the highest levels since 2007 — now some 42 basis points higher than the yield on 10-year notes.
The dollar index, meanwhile, was marked 0.25% higher against a basket of its global currency peers in the overnight session to change hands at 110.033.
In Europe, the Stoxx 600 was marked 0.49% lower in early Frankfurt trading, with markets in London closed to mark the Queen’s funeral. In Asia, the region-wide MSCI ex-Japan index fell 0.65% while Japan’s Nikkei 225 was closed for its Respect for the Aged Day holiday.
On Wall Street, futures contracts tied to the S&P 500 are indicating a 34 point opening bell slide while linked to the Dow Jones Industrial Average are priced for a 230 point slump. Futures tied to the tech-focused Nasdaq are indicating a 115 point move to the downside.
2. — Week Ahead: Fed Rate Hike In Sharp Focus
Wednesday’s Federal Reserve rate decision, and subsequent press conference from Chairman Jerome Powell, will be the unquestioned highlight of what could be the most important week of the year for US stocks.
With investors now increasingly pricing-in the prospect of a US recession, and more and more companies warning on the impact of fading demand and surging input costs, traders and investors will be keenly focused on any suggestion that Powell may alter the Fed’s inflation fight in order to avoid longer-term damage to the world’s biggest economy.
The Fed’s two-day meeting begins Tuesday, with a rate decision expected at 2:00 pm Eastern time on Wednesday and Powell’s question-and-answer session with the media following 30 minutes later.
Beyond the Fed, investors will also be focused on a key set of figures from the quickly-weakening housing market, with data on housing starts and building permits for the month of August at 8:30 am Eastern time on Tuesday, and existing home sales data following on Wednesday.
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July quarter earnings from homebuilders Lennar LEN and KB Home (KBH) are expected Wednesday, as is an important earnings release from retail giant Costco Wholesale (COST) on Thursday.
3. — Take Two Slumps On Report of Grand Theft Auto VI Leak
Take-Two Interactive (TTWO) shares slumped lower in pre-market trading following a weekend report that portions of its new Grand Theft Auto VI game were leaked online.
Bloomberg News reported Sunday that a hacker was able to gain access to several videos of gameplay from the highly-anticipated Grand Theft Auto VI, which was made by Take-Two studio Rockstar Games, and post them to a message board.
Analysts had been looking for Grand Theft Auto VI to revive a muted near-term outlook for the video game industry after Take-Two cautioned that a pullback in discretionary spending was likely to keep full year revenues in the region of $5.8 billion and $5.9 billion and firmly shy of Street forecasts.
Take-Two shares were marked 5.7% lower in pre-market trading to indicate an opening bell price of $117.10 each.
4. — Volkswagen Nudges Higher On $75 Billion Porsche IPO Target
Volkswagen AG (VWAPY) shares edged higher in early Frankfurt trading Monday after the world’s second-largest carmaker said it would seek a $75 billion valuation for its planned IPO of luxury division Porsche.
The complicated listing, which is set to debut on the Frankfurt Stock Exchange on September 29, will be comprised of 911 shares — a figure that Volkswagen said would represent the group’s famous roadster — divided into common and preferred portions. A further 113,875 million shares, with no voting rights, will also be offered.
Porsche SE, a company owned by the wealthy Porsche and Piech families which does not make cars, will purchase 25%, plus one share, when the deal is ultimately priced.
Volkswagen expects to take in as much as €19.5 billion from the sale, 49% of which will be returned to shareholders via a special dividend.
Volkswagen shares were marked 0.14% higher in the opening hour of trading in Frankfurt to change hands at €145.72 each. Volkswagen’s US-listed shares closed at $14.70 each on Friday.
5. — Britain Mourns Queen Elizabeth With Historic State Funeral
A lavish state funeral, expected to include hundreds of world leaders, more than a million mourners and a worldwide television audience in the billions, will be held in central London Monday to mark the passing of Her Majesty Queen Elizabeth II.
The state funeral, which is expected to include the largest British police effort on record, will begin at 10:44 am London time as the Queen’s coffin makes its way from Westminster Hall, in the Houses of Parliament, to Westminster Abbey, where the main service will begin at 11:00 am London time.
Following the service, which will be attended by US President Joe Biden and First Lady Jill Biden, Her Majesty’s coffin will travel from central London to Windsor Castle, where it is expected to arrive shortly after 3 pm.
A private service, attended only by close family members, will take place at 4 pm London time, after which the Queen will be laid to rest, next to her husband of 74 years, Prince Philip, at the King George VI Memorial Chapel.