US President Joe Biden recognized the risk of recession for the first time as the IMF cut its growth forecast for the US economy. The drama in the UK bond market continues as the Bank of England gave mixed signals about its intentions. The U.S. stock market is poised for a rebound after the NASDAQ moved into a bear market on Tuesday as Pepsi beat forecasts for the third quarter. Europe survived a scare over another Russian oil pipeline leak, and OPEC and EIA oil market forecasts will be released today. Meanwhile, central bankers will continue to take turns speaking on the sidelines of the IMF’s fall meeting. Here’s what you need to know about the financial market on Wednesday, October 12.

1- Biden recognized the risk of recession amid lower IMF forecasts

U.S. President Joe Biden acknowledged for the first time the risk of the U.S. economy falling into recession, on the same day that the International Monetary Fund cut its growth forecast for the country (and the rest of the world) and the NASDAQ moved back into a bear market.

“I don’t think there’s going to be a recession,” Biden told CNN. – If there is, it will be a very minor recession. That is, we’re going to go down a little bit.”

The IMF earlier cut its forecast for the U.S. economy to 1.6 percent this year and 1.0 percent next year.

2. The Bank of England drama continues

Confusion reigns in the UK market as conflicting reports about the Bank of England’s intentions undermined the narrative that Bank Governor Andrew Bailey tried to deliver on Tuesday.

Bailey said the Bank would stop direct purchases of U.K. government bonds on Friday night and shift to a liquidity support regime based on repo operations, whose impact on the money supply is easier to neutralize. However, unnamed financiers told the Financial Times that the Bank had signaled it might be prepared to extend its purchases beyond Friday.

Similar confusion has arisen over the government’s tax and spending plans, which are behind the volatility in the UK market. The government confirmed that it will still introduce a renewable energy tax to fund a colo 60 billion pounds ($67 billion) worth of energy subsidies over the next winter. That raised hopes that other unfunded tax increases and subsidies proposed by the new government last month would also be scrapped.

The pound gained 1.0% to $1.1071, but the yield on benchmark 10-year bonds rose another 16 basis points to 4.60%.


3- U.S. stock market set for a rebound as Pepsi beats forecasts

U.S. stock indexes are set to open higher, stabilizing after fresh losses on Tuesday that sent the NASDAQ Composite back into bear market territory, down more than 20% from its peak.

By 06:20 ET (10:20 GMT), Dow Jones futures were up 135 points or 0.5%, S&P 500 futures were up 0.6% and Nasdaq 100 futures were up 0.8%.

The release of U.S. producer price inflation (PPI) data for September is likely to draw a lot of attention, given the big role that corporate earnings numbers played in price gains earlier this year. Energy stocks will be in focus after nuclear power group Westinghouse Electric agreed to be bought out by a consortium of Brookfield and Cameco.

Market sentiment may be helped by PepsiCo Inc, after the beverage group beat expectations and raised its outlook for the year, overcoming headwinds from a stronger dollar.

4. Korea raises rate, citing weakness in the won; speeches by Lagarde and Bowman expected

Global interest rates remain in focus at the International Monetary Fund’s fall meeting, with ECB chief Christine Lagarde scheduled to speak later today. Bank of France Governor Francois Villeroy de Gallo earlier did nothing to help the euro, mouthing the possibility of raising key refinancing and deposit rates by just 0.5% at the ECB’s next meeting in late October.

The day before, the Bank of Korea raised its key rate by 0.5% to 3.0%, as expected, and said further increases would be needed as a weak won would push up prices of imported goods.

Fed Governor Michelle Bowman is also due to speak later in the day, while Michael Barr, head of banking supervision at the Fed, may provide insight into the likelihood that volatility in the UK will spill over into the US market. The market for throwaway bonds and collateralized loan obligations has already begun to show signs of forced selling.

5. EIA and OPEC reports are expected; concerns about the pipeline in Poland have passed

The Organization of the Petroleum Exporting Countries and the U.S. government will release updated oil market reports. OPEC’s monthly report for October will be released first, followed by the U.S. Energy and Information Administration’s (EIA) short-term energy outlook.

The oil market overcame early panic after Polish pipeline operator PERN discovered a leak in the main string of Russia’s largest export pipeline, Druzhba. PERN later concluded that the leak was an accident, not sabotage.

U.S. oil inventory data is due at 4:30 p.m. ET from the American Petroleum Institute (API) a day later than usual. The U.S. Department of Agriculture’s monthly report will be released at 12:00 p.m. ET.