© Reuters.
Investing.com — Fed chief Jerome Powell signals again that more rate hikes are likely this year, leading to weakness in equity and energy markets and focus on the latest round of speakers from central banks. Adani Group comes under pressure again as US authorities investigate the Indian conglomerate, while the Turkish lira falls to record lows.
1. Powell maintains rate hike outlook; more Fed speakers due
Jerome Powell wrapped up his semiannual two-day meeting before Congress on Thursday, and the US Federal Reserve chairman stuck to his previously expressed line that more rate hikes are likely this year as the central bank struggles to return to its 2% target rate.
“We don’t want to do more than we have to,” Powell said, speaking to the Senate Banking Committee. “Most people on the (Federal Open Market) Committee think there will be more rate hikes, but we want to do it at a pace that allows us to see the incoming data.”
Futures traders see a greater than 75% chance that the next one will arrive in July, with another quarter percentage point increase later this year.
The Fed has made it clear that it is closely watching economic data to help guide its decision, and the release of the data will offer a new look at the health of the country’s economy.
There will also be more Fed officials speaking later in the session, including the St. Louis Fed president, the Atlanta Fed president and the Cleveland Fed president.
2. Adani under pressure again
Indian conglomerate Adani Group is back in the spotlight, after suggestions the company faced regulatory scrutiny in the US over its response to a short selling report earlier this year.
In January, Hindenburg Research said it was short in the group and accused the conglomerate of misusing offshore tax havens and share price manipulation.
Bloomberg reported that the US Attorney’s Office in Brooklyn, New York, had sent inquiries to large US stakeholders in Adani about how the company responded to these allegations, adding that the Securities and Exchange Commission and US Securities was also investigating.
Shares of companies under the Adani umbrella fell sharply on Friday, with Adani Enterprises (NS:), the conglomerate’s flagship firm, was down nearly 9%.
3. Futures down; a losing week seems likely
US futures traded lower on Friday, with Wall Street on track to post a losing week with sentiment battered by Fed Chairman Jerome Powell signaling more rate hikes ahead, prolonging the central bank’s aggressive tightening stance.
As of 04:30 ET (0830 GMT), the contract had fallen 95 points or 0.3%, fell 20 points or 0.5%, and fell 95 points or 0.6%.
The three major stock averages closed mixed on Thursday but are on track to post losses this week, snapping multi-week winning streaks.
Gains came from companies including used car dealer CarMax (NYSE:) and building materials firm Apogee Enterprises (NASDAQ:), while June PMI data is expected to show activity in the sector of the country remains depressed while the sector shows strength.
4. Turkish lira in free fall
The Turkish lira fell to a new record low against the US dollar on Friday, extending its losses the day after the country’s central bank raised interest rates by 650 basis points to 15%.
As of 04:30 ET, it was trading 1.3% higher at 25.1960, having risen as high as 25.4682 earlier in the session. The Turkish currency is heading for its 16th week of decline, its longest losing streak since 1999.
The interest rate hike, while strong under usual circumstances, was less than the generally expected rise to 21% as new Governor Hafize Gaye Erkan changed the course of monetary policy after years of unorthodox easing to combat the rising inflation.
New Finance Minister Mehmet Şimşek has stressed that he favors a floating currency regime, suggesting more volatility ahead as the market adjusts to new circumstances.
5. Oil weakens on fears of demand growth
Crude prices weakened on Friday, heading for big weekly losses after a string of interest rate hikes, and warnings of more to come in the US, raised concerns about global demand growth.
As of 04:30 ET, futures were down 1.6% at $68.42 a barrel, while the contract was down 1.3% at $73.16 a barrel. Both contracts were now on track to lose more than 3% each this week.
The aggressive stance taken by several central banks this week has raised fears that economic activity could be affected, affecting demand for oil this year.
News that the US contracted much more than expected in the week to June 16 provided some support, falling 3.8 million barrels according to data from the Energy Information Administration released Thursday.
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