By Peter Nurse
The Federal Reserve tapering debate intensifies, while the corporate earnings season continues. Companies look to address the climate change issue, while bitcoin and crude prices push higher. Here’s what you need to know in financial markets on Tuesday, 10th August.
1. Tapering debate intensifies
The market won’t be able to accuse the Federal Reserve of a lack of communication if the central bank does start reining in its extraordinary monetary stimulus later this year.
Atlanta Fed President Raphael Bostic on Monday joined a growing chorus of policymakers saying the central bank should move quickly, saying it could taper its asset purchases with another strong month or two of employment gains.
His colleague from Boston, Eric Rosengren, suggested September for a tapering announcement, matching previous comments from St. Louis Fed President James Bullard, who suggested the taper could be started in the fall and end by March.
Chicago Fed President Charles Evans continues the dialogue later Tuesday and Kansas City Fed President Esther George is set to speak on Wednesday.
Fed officials began debating when and how they should taper the $120 billion monthly asset purchases at their July meeting, pledging to keep this up “until substantial further progress” has been made toward its goals of maximum employment and 2% inflation.
2. Stocks seen flat; AMC) in focus
U.S. stocks are set to open largely unchanged, with investors still digesting the ongoing corporate earnings season.
AMC Entertainment (NYSE:AMC) is likely to be in the spotlight after the troubled movie theater chain reported a lower loss than expected after the close Monday, also announcing it would begin accepting bitcoin at all U.S. locations this year.
Coinbase Global (NASDAQ:COIN) is set to report quarterly earnings later Tuesday, with the crypto exchange’s stock receiving a boost from the recent sharp gains in bitcoin.
Likely to weigh on sentiment was the weak trading debut of Tencent Holdings-backed South Korean company Krafton, closing down 8.8% from the IPO price, with analysts citing an expensive valuation and China regulation risks.
3. Companies need to address climate change – StanChart CEO
Climate change is becoming a pressing issue in the corporate sector, with a report from a UN-backed panel warning Monday that global warming is dangerously close to spiralling out of control.
Companies should not rely on governments to reach agreement at a global summit on climate change in Scotland in November, but rather take more action themselves, Standard Chartered (OTC:SCBFF) CEO Bill Winters said on Tuesday, at an online industry event.
StanChart has said it aims to reach net zero carbon emissions from its operations by 2030 and have the companies it finances reach net zero carbon emissions by 2050.
4. Bitcoin receives U.S. regulatory boost
Bitcoin is climbing again, with the largest cryptocurrency by market capitalization boosted by the news that U.S. lawmakers have reached a compromise on cryptocurrency tax provisions.
Bitcoin traded at $45,879, up 2.3% on the day, having topped $46,000 earlier, a new three-month high.
Concerns had been growing that the original loose definition of “broker” in the highly awaited infrastructure bill would mean certain crypto companies would suffer from cumbersome regulatory reporting restrictions, potentially stifling innovation in the crypto space.
However, a couple of senators revealed an amendment on Monday, which seeks to exempt non-broker type entities from the legislation.
5. Crude bounces, but sentiment still weak
Oil prices bounced Tuesday after falling to three-week lows during the previous session amid worries the growing number of Covid-19 cases, primarily in China, will curb crude demand.
The fast-spreading delta variant of the virus has arrived in China, the second largest consumer of oil in the world, resulting in renewed mobility restrictions, with domestic air travel hit hard.
This has raised concerns about the short-term demand outlook and interrupted a strong rally which saw prices advance more than 50% over the first half of the year.
Attention will now turn to the release of U.S. crude oil supply data from the American Petroleum Institute later in the session, as a gauge over whether rising Covid U.S. cases have also had an impact.