Fed rate hike, ECB emergency meeting, $20k bitcoin

© Reuters

by Jeffrey Smith

Investing.com – The Federal Reserve is set to raise interest rates by an expected 75 basis points, in what would be the largest rate increase in nearly 30 years. The European Central Bank is calling an emergency meeting to try to stop the explosion of bond spreads in the eurozone. US retail sales are due for May, and Chinese retail sales and industrial production data show an improvement in the economy as major lockdowns were lifted in Shanghai and elsewhere. Bitcoin is bouncing off the $20,000 support. Apple and Disney Big spending on sports rights, oil is falling after a modest rise in US stocks, but the outlook remains tough, according to the International Energy Agency. Here’s what you need to know in the financial markets on Wednesday, June 15th.

1. The Fed is preparing for the biggest rate hike since 1994

The Federal Reserve is expected to raise the target range for the federal funds by 75 basis points to 1.5%-1.75%, in what would be the largest rate hike in 28 years.

Investors quickly re-priced their expectations in the wake of Friday’s May inflation report, which rose to a 4-decade high of 8.6%. Among other things, the Fed will weigh the potential benefits of a more aggressive move now against the negative impact it would have on the credibility of its forward guidance, which has clearly indicated a half-point rise to its usual pre-start. Meet the blackout period.

The Fed at 2 PM ET (1800 GMT) will also take into account the latest signals of momentum in consumer spending. May data is due at 8:30 a.m. ET.

2. Panic in the streets of Frankfurt

European Central Bank trying to stop the explosion of volatility in the bond markets in the euro area.

Bond spreads, a typical measure of financial stress in the eurozone and a reflection of market fears of countries forced out of the currency union, widened after the European Central Bank failed to provide any information on how it aims to contain spreads as it embarks on its first major tightening. policy for a decade.

Bond markets responded positively to the news, with the yield dropping 19 basis points by 6:05 AM ET to trade at 4.03%. It broke 4% for the first time in more than eight years on Monday. This is a level Italy will struggle to maintain unless its growth sustainably accelerates from what it has recorded so far since it joined the eurozone in 1999. Meanwhile, it rose 0.7% to $1.0482.

3. Stock set to bounce. Sports rights deals eyes

US stock markets are scheduled to open higher at a later time, but everything will depend on the Fed’s decision and before that, on the retail sales print.

By 6:10AM ET, it was up 133 points, or 0.4%, on track to snap up a five-day losing streak. It rose 0.5% while it rose 0.7%.

The tune was also helped by better-than-expected data and data from China overnight, spurring hopes that the country is overcoming its lingering problems with COVID-19.

Stocks will likely be in focus later, including Apple (NASDAQ:), which agreed to pay at least $2.5 billion for broadcast rights to Major League Soccer on Tuesday, while Walt Disney (NYSE:) will also be in focus. After agreeing to pay $3. $1 billion to continue broadcasting cricket in the Indian Premier League. The competition for broadcasting rights was lost to a joint venture of The India Company.

4. Bitcoin rebounded at $20K as MicroStrategy failed to calm nerves

It fell another 9% to reach a new 18-month low, before rebounding – without conviction – from the $20,000 level.

“Digital gold” has now lost 33% in the past seven days, in a fresh blow to its proponents’ claims that it can act as a store of value.

Meanwhile, it is down another 10.5% and is now down about 43% over the past week, as the collapse of crypto lender Celsius Network continues to send shock waves through the ecosystem of tokens linked in one way or another to the Ethereum blockchain.

Michael Saylor, CEO of MicroStrategy (NASDAQ:), said Tuesday that his company — a de facto cryptocurrency hedge fund — has enough additional collateral to block any margin call on a $205 million loan the company had previously said would happen at a rate of $22,000.

5. Oil drops because stockpiles are higher than the IEA’s warning

Crude oil prices have fallen slightly, despite a new warning from the International Energy Agency next year.

The International Energy Agency has indicated the possibility of a prolonged decline in Russian production that may be partially offset by production growth in the Middle East and the United States.

This followed a warning from OPEC on Tuesday in its monthly oil report that Western sanctions on Russia would likely pump the so-called OPEC+ bloc less than expected this year.

By 6:30 AM ET, futures were down 1.2% to $117.53 a barrel, while they were down 1.0% at $119.98 a barrel. The US government releases inventory data at 10:30 AM ET, a day after reporting a sudden but small rise in crude oil stocks.

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