The global market rally has run into a familiar pattern of new sell-offs amid recession fears. Fed chief Jerome Powell will head to Capitol Hill for two days of speeches. U.S. President Joe Biden is expected to call for the repeal of the federal gasoline tax. Also, UK inflation hits a new high and the IEA warned of a complete halt to Russian gas supplies to Europe. Here’s what you need to know about the financial market on Wednesday, June 22.

1. GLOBAL MARKET RALLY FADED

The global stock market rally quickly devolved into a familiar pattern of new sell-offs as recession fears took over again.

Asian and European stock markets fell the day before and bonds rose, while European stock indexes lagged as the International Energy Agency warned regional leaders to prepare for a complete cutoff of Russian gas supplies.

By 06:15 a.m. ET (10:15 a.m. GMT), the yield on 10-year U.S. Treasuries had fallen 8 basis points to 3.22%, while 2-year bonds were down 7 basis points to 3.13%.

Fading risk appetite was also evident in the cryptocurrency sector, with bitcoin falling 4.0% to $20,441.

2. POWELL TO ADDRESS CONGRESS; MORTGAGE LENDING DATA EXPECTED

US Federal Reserve Chairman Jerome Powell will begin 2 days of speeches to Congress on the state of the economy, and will address the Senate Banking Committee from 08:30 Eastern Time (12:30 GMT).

He will likely be asked about the trade-offs between lower inflation and the risk of plunging the U.S. into recession (Citigroup (NYSE:C) analysts raised their estimate of recession risk to 50% on Tuesday).

Powell’s recent meeting with President Joe Biden seemed to give him all the leeway he needed to bring inflation down from its 4-decade high. However, Congressmen facing re-election in 5 months may be less generous.

Signs that the U.S. economy is starting to cool are already multiplying: sales of completed homes fell in May for the fourth straight month as interest rate hikes weigh on housing affordability figures. MBA data on US mortgage applications is due at 07:00 Eastern Time (11:00 GMT).

3. THE US MARKET WILL OPEN LOWER

U.S. stock indexes will lose most of their gains at the open on Tuesday pending any signals from Powell that the economic trajectory will end with less Fed monetary policy tightening than currently expected.

By 06:15 a.m. ET (11:15 a.m. GMT), the Dow Jones futures were down 361 points, or 1.2%, while the S&P 500 futures were down 1.4% and the Nasdaq 100 futures were down 1.7%.

Stocks that are likely to be in the spotlight a little later are Altria (NYSE:MO) after the Biden administration released a plan that would force tobacco companies to remove most nicotine from cigarettes, weakening consumers’ tendency to become addicted. Also of interest is Toyota (TYO:7203), which noted attempts to increase production through September despite ongoing supply chain issues.

4. THE CONSUMER PRICE INDEX IN THE UK HIT A NEW HIGH AMID ONGOING RAILROAD STRIKES

UK inflation rose in May to another 40-year high of 9.1% as food and energy prices continue to erode consumers’ disposable incomes. Correspondingly, core inflation fell short of expectations as spending on essentials declined.

System pressures remain high; with factory prices up 15.7% year-on-year and 1.6% month-on-month in the country. The developments are not helped by sustained weakness in the pound sterling, which fell to $1.2176 before cutting losses.

The UK is in the midst of a 3-day national rail strike that could set an important precedent for a pay rise for public sector workers this year. One regional branch of the RMT train drivers’ union has agreed in principle to accept a 7.1% pay rise offer.


A new separate study has found that Brexit has made the UK economy less open and competitive than before.

5. OIL CHEAPER ON RECESSION FEARS; BIDEN LIKELY TO MAKE GAS TAX CALL

Crude oil prices continue to fall as fears of a global recession clouded the demand outlook. Reports of a COVID-19 outbreak in China’s Macau gambling center have not improved sentiment.

By 06:30 a.m. ET (10:30 GMT), WTI crude was down 4.7% to $104.71 a barrel, while Brent crude was down 4.2% to $109.84.

U.S. President Joe Biden is expected to later call on Congress to vote to repeal the federal gasoline tax and support other measures that would lower prices in the United States. As these measures are aimed at supporting demand, it is unclear whether they will ultimately put downward pressure on global prices.

The American Petroleum Institute (API) will release weekly data on the nation’s oil inventories at 4:30 p.m. ET (8:30 p.m. GMT), a day later than usual due to Monday’s holiday.