Top 5 Things to Know in the Market on Wednesday, June 17th
By Geoffrey Smith
Investing.com -- China tightens lockdown restrictions to stop a second wave of infections in and around Beijing, while its soldiers come to deadly blows with India's on a disputed border. The two Koreas are also at each other's throats. Stocks are set to open modestly higher, ahead of Fed Chair Jerome Powell's second day of testimony, but news from Norwegian Cruise Lines and Southwest Airlines (NYSE:LUV) will cast a shadow over the beleaguered travel sector. European car sales recover moderately from April's collapse, and OPEC and the U.S. government will give their two cents' worth on the state of the oil market. Here's what you need to know in financial markets on Wednesday, 17th June.
1. Beijing tightens restrictions after new Covid-19 outbreak; Fauci warns it isn't over in the U.S.
The Chinese capital tightened lockdown restrictions to tackle what authorities called an “extremely severe” outbreak of the Covid-19 virus, illustrating the pitfalls of the world’s return to normality after a destructive first wave of the pandemic.
Beijing closed its schools, universities and entertainment venues and cancelled over 1,000 flights, and authorities also instated a three-week quarantine rule in the neighboring province of Heilonjiang. However, they haven’t as yet ordered the closure of factories and shops.
The news comes as the U.S. wrestles with a rise in new infections in states from Florida and Texas to California. Anthony Fauci, head of the National Institute for Allergies and Infectious Diseases, told the Financial Times that “All you need to do is look at the data, the facts, to see that the pandemic is not over by any means. The numbers speak for themselves.”
Vice-President Mike Pence had downplayed talk of a second wave of infections in the U.S. as “overblown” panic in an op-ed for The Wall Street Journal published on Tuesday.
2. Chinese and Indian soldiers die in border skirmish; Korean tensions rise
The world’s two most populous nations are at each other’s throats over a border dispute. At least 20 soldiers died in a clash between Chinese and Indian troops in a disputed region of the Himalayas mountain range, according to information from the countries’ armed forces.
The clash came as Indian forces tried to verify that China had honored a pledge to vacate certain disputed parts of their joint border.
Elsewhere in Asia, North Korea threatened to redeploy troops to its demilitarized border with South Korea and resume “all kinds of regular military exercises” in a further escalation of tension after blowing up a building that was supposed to host peace talks between the two countries on Tuesday.
South Korea responded with warnings of its own. Relations between the two have worsened considerably since the collapse of President Donald Trump’s peace overtures to North Korea in 2018.
3. Stocks set to open higher, but travel sector weighs
U.S. stocks are set to open with modest gains ahead of the second day of Federal Reserve Chairman Jerome Powell’s Congressional testimony.
Powell had again warned of a slow and bumpy recovery on Tuesday, although he acknowledged that the worst may be over for the U.S. economy, on a day when fresh data showed retail sales and industrial production rebounded in May.
By 6:30 AM (1030 GMT), the Dow Jones 30 Futures contract was up 59 points, or 0.2%, while the S&P 500 Futures contract was up 0.3% and the Nasdaq 100 futures contract was up 0.4%.
Stocks in focus on Wednesday are likely to include Norwegian Cruise Line (NYSE:NCLH), which extended the suspension of sailings by some of its biggest brands through September in an announcement after the bell on Tuesday. Southwest Airlines (NYSE:LUV) may also come under pressure after saying it would keep middle seats open on its flights due to Covid-19 concerns, reducing its effective capacity.
4. Tesla's Cali sales plunge; European auto sales recover weakly
Tesla (NASDAQ:TSLA) stock will also be in the spotlight after a report suggesting that its sales in California fell 37% in April and May. The report, citing data from Dominion Enterprises, underlines the problems in keeping the company’s sales momentum in a key state market going.
The news comes at a time when car sales worldwide are flagging. Data released in Europe on Wednesday showed new car registrations down over 53% on the year in May, although this was an improvement from a decline of over 70% year-on-year through April. The biggest increase came in Italy, where sales had all but ground to a halt in the first full month of its pandemic lockdown.
5. EIA, OPEC to update on oil markets
The U.S. government will release its weekly report on domestic oil supplies at 10:30 AM ET, with analysts’ estimates of a 152,000 barrel decline in crude inventories looking vulnerable to a negative surprise after the American Petroleum Institute reported a surprise increase in stocks late on Tuesday.
Before that, the Organization of Petroleum Exporting Countries will release its monthly report on the state of the oil market and is expected to corroborate the International Energy Agency’s upward revisions to crude demand for this year and next.
The Russian news agency TASS reported meanwhile that parties to the ‘OPEC+’ deal on output restraint were still failing to comply fully with the deal in May, something that could make Russian support for a further extension more problematic.
U.S. crude futures were down 0.8% at $38.06 a barrel, while Brent futures were down 0.4% at $40.77 a barrel.
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