Congress hears testimony from Fed Chair Powell and Treasury chief Mnuchin for the first time since their spat over the Fed’s crisis lending facilities. Zoom fails to match sky-high expectations but stocks are set to open at new highs anyway. Bitcoin hits an all-time high as the dollar languishes and OPEC fails to agree on how much oil to pump next year. Here’s what you need to know in financial markets on Tuesday, December 1st.
Powell, Mnuchin in Congress to explain their spat
Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin will update Congress from 10 AM ET (1500 GMT) onward. It’s their first joint testimony since Mnuchin refused to extend authority for four lending programs that the Fed says are still needed to support the economy through the pandemic.
Neither Powell nor Mnuchin made any reference to their public dispute over the issue in prepared remarks, but are certain to be questioned about it later.
Concerns about the economy revived late on Monday after California Governor Gavin Newsom indicated he may have to issue a new stay-at-home order to stem a growing crisis in the state’s hospitals.
Away from Congress, Fed board member Lael Brainard – tipped by some to succeed Powell as Fed chair – will also speak at 12 PM ET. On the data calendar, meanwhile, there are Redbook research data due at 8:55 AM ET and the ISM manufacturing survey at 10 AM.
Bitcoin hits all-time high as dollar languishes
Whether or not Congress asks Powell and Mnuchin about it, the markets continue to give their verdict on their stewardship of the currency. (Bitcoin) hit an all-time high as last week’s shock sell-off was taken as a dip to buy.
The digital currency stopped just short of the $20,000 mark at $19,951 but remains supported by a growing number of speculators willing to dip a toe in the water. By 6:15 AM ET, it had retraced to $19,926.00 up 7.6% on the day.
The Dollar Index, which tracks the greenback against a basket of developed market currencies, continues to languish near a 30-month low at 91.782, edging lower against both riskier and haven peers.
Stocks set to open at new records
U.S. stock markets are set to open sharply higher, testing new record highs, on growing optimism that vaccines to treat Covid-19 will be available sooner rather than later. Pfizer (NYSE:PFE) and BioNTech said earlier Tuesday that they have filed to have their drug approved by EU regulators.
By 6:15 AM, Dow Jones Futures were up 347 points, or 1.2% while the S&P 500 Futures contract was up 1.1% and the NASDAQ Futures contract was up 0.9%.
Stocks likely to be in focus later include Zoom Video (NASDAQ:ZM) stock, which fell 7.6% in after-hours trading after reporting earnings and an outlook that, while intrinsically strong, couldn’t match the optimism baked into its current price.
Also in focus is Exxon Mobil (NYSE:XOM) stock, which fell 3.5% on Monday after announcing a massive $20 billion writedown to its gas assets and a sharp cut in capital spending. Exxon was up 2.4% in premarket.
Europe shows the strain of lockdown
The European manufacturing sector held up fractionally better than expected in November amid a second wave of lockdowns to contain the Coronavirus.
The Eurozone manufacturing Purchasing Managers Index actually rose to 53.8 from 53.6, defying expectations of a drop, although national indices for Germany and Spain both fell.
Unlike the spring, all major European economies have kept their factories open this time around, leaving the strain of lockdowns to fall solely on services. PMIs for those – and the composite Eurozone PMI – will be announced on Wednesday.
The strain of lockdown was still visible in another month of sub-zero inflation, which ran at -0.3% on the year in November. That puts further pressure on the European Central Bank to act when it meets next week.
OPEC fails to agree on output
OPEC failed to agree on an output policy for the next few months after the United Arab Emirates – with the apparent backing of non-member Russia – argued that the bloc should raise output by 500,000 barrels a day as of January 1.
The consensus expectation, fostered ahead of time by the bloc’s most powerful member Saudi Arabia, had been that output would be frozen at current levels for another three months.
OPEC has given itself another two days to thrash the issue out before making a final decision with Russia and others on Thursday.
U.S. Crude prices were largely flat at $45.36 a barrel, while Brent Futures were up 0.3% at $48.03 a barrel. American Petroleum Institute data on U.S. stockpiles are due at 4:30 PM ET as usual.