Pre-market inventory: natural gas market turmoil heralds trouble

Natural gas prices in Europe are almost 10 times higher than they were at the same time last year.

The prices in the United States are significantly lower, but they are also increasing. On Monday, they reached their highest level in 14 years. They have been pushed higher by increased energy use during heatwaves, demand from Europe as countries try to stock up for the winter and lagging production.

Salomon Fiedler, an economist at Berenberg Bank, told me that the sharp rise in natural gas prices this week makes him convinced that Europe is already entering recession.

S&P Global’s Purchasing Managers’ Index released on Tuesday, which measures the services and manufacturing sectors of the economy, showed business activity among the 19 countries that use the euro contracted for a second consecutive month.

There was a reason for optimism. S&P Global said “there were again signs that inflationary pressures in businesses had passed their peak, with rates of input cost increases and output prices falling across the board.”

But Fiedler expects that relief to be “short-lived”.

“With the recent spike in energy prices – wholesale gas prices in particular – we’re likely to see a bit more inflation for the rest of this year,” he said.

This is not just bad news for Europe. Citi said UK consumer inflation could peak at 18% in 2023, nine times the Bank of England’s target.

Strong fuel demand and limited supply are also supporting natural gas prices for buyers in Asia and, to some extent, North America. Global businesses could suffer as exorbitant bills weigh on demand for goods and drive up their own costs. And even if central banks don’t control energy prices, they could be forced to keep raising interest rates if the impact spreads to the wider economy and they have to fight against it. a new wave of inflation.

A word of caution: Oil prices are moving in the opposite direction. The barrel of Brent, the world reference, is down 16% since the beginning of July. US oil prices are 15% lower over the same period.

Other factors are driving this part of the energy market as traders focus on expectations that slowing global growth will reduce demand for fuel.

However, crude prices could remain volatile over the next few months. Saudi Energy Minister Prince Abdulaziz bin Salman told Bloomberg this week that “extreme” market volatility is disconnected from fundamentals and that OPEC and its allies could be forced to cut production as a result.

Stocks fall as Fed fears return

Hopes that the Federal Reserve would rein in aggressive interest rate hikes faded on Monday. Shares fell as investors began to worry again about the central bank announcing a sharp hike next month and adopting a hawkish tone at its annual meeting in Jackson Hole this week.

The latest: The Dow Jones ended the day down 1.9%, reports my CNN Business colleague Paul R. La Monica. The S&P 500 and the Nasdaq Composite fell 2.1% and 2.6% respectively.

All 30 Dow stocks were down and only 25 of the top-tier S&P 500 stocks traded higher on Monday.

The CNN Business Fear & Greed Index, which measures seven indicators of market sentiment, is approaching “fear” levels. The index entered “greed” territory just a week ago.

What’s changed: Over the summer, traders bet that the Fed could relax as inflation peaked and a US recession could potentially be averted.

But that wishful thinking has been met with heavy-handed rhetoric from Federal Reserve officials and the reality that policymakers will be reluctant to declare victory prematurely.

Markets now price a 57% chance of a third straight three-quarters percentage point hike in September, according to CME Group. That’s up from 41% a week ago. A series of such large increases is unprecedented in modern Fed history.
Nearly three out of four economists recently polled by the National Association of Business Economics expressed reservations that the Fed could bring inflation back to its 2% target without causing a recession within the next two years.

“The stock market summer party appears to be coming to an abrupt end as hardline central bank policymakers turn up as unwanted guests, reminding revelers that inflation still remains a significant risk,” Susannah Streeter said. , an analyst at Hargreaves Lansdown, to his clients. tuesday.

Bed Bath & Beyond is running out of steam

When struggling businesses become meme stocks, it can provide a lifeline for their struggling businesses. But the window of opportunity for Bed bath and beyond (BBBY) closes quickly as its stock falls again.

The shares rose more than 350% from the start of August to last Wednesday, at one point hitting $30 apiece. In recent days, the stock has plunged again, ending Monday at $9.24.

Conduct of the sale: Investor Ryan Cohen, founder of Chewy and chairman of GameStop, sold most of his stake in the company. Cohen’s support had helped fuel the initial rally.

Now Bed Bath & Beyond has to face a grim reality: it’s in trouble. Sales for its quarter ending in May fell 25% from the same period in 2021, and it needs cash. Reportedly, some of the company’s suppliers have stopped shipping products due to late payments for those goods.

With his stock back on the decline, however, it will be much more difficult to raise additional funds to change his fortunes.

Bed Bath & Beyond “is in an unenviable position as it faces steep market share losses, an inventory glut and dwindling cash reserves,” said Wedbush Securities analyst Seth Basham, in a recent note to customers.

The takeaway: traders coordinating online have become a powerful force in markets, and the phenomenon is showing signs of persistence. But support for Reddit and other corners of the internet can be choppy, and taking advantage of stock market gains to reshuffle physical businesses is no easy task.

Next

Dick’s Sporting Goods, Macy’s, JD.com and JM Smucker announce results before US markets open. Nordstrom, Toll Brothers and Urban Outfitters follow after the close.

Also today →

  • US PMI data for August releases as of 9:45 a.m. ET.
  • New home sales for July arrive at 10 a.m. ET.

Coming tomorrow: revenue from Petco, Nvidia, Salesforce, and Snowflake.

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