Geoffrey Smith 

Investing.com — Stocks will continue to recover, supported both by an agreement to delay the crisis at the debt limit temporarily and by sharply reversing prices after Vladimir Putin’s jawboning. Amazon (NASDAQ) is due to release weekly jobless claims, while Amazon’s Twitch service has suffered a serious hack. German industrial production fell in August and Joe Biden has agreed to meet Xi Jinping in principle before the year ends. This is a tentative indication of improvement in U.S.–Chinese relations. What you need to know for financial markets on Thursday 7th October.

1. Is it possible to knock down a ceiling?

The U.S. averted – for now – the risk of a damaging default on its debt as Senate Minority Leader Mitch McConnell proposed a temporary suspension of the debt ceiling until early December.

An additional condition is attached to the offer. Democrat legislators will need to attach a dollar limit for the extension. Chuck Schumer, Senate Majority Leader, indicated that it was most likely that the offer would be accepted.

Market reactions to Wednesday’s news highlighted the extent to which these concerns have weighed on U.S. market performance, even though ritual political theatre accompanying debates has been an integral part of U.S. Politics for 25 years.  It’s also a reminder of the heavy political price that could be paid by any party seen to be responsible for causing the government to default. The overnight level of 1.52% was maintained.

2. Putin intervenes to end the European energy crisis

An additional market that saw some relief was the European natural-gas market. This market experienced a small reprieve due to the fact that the spot price of the U.K. fell by 49%, in reaction to Russia increasing its supplies to Europe.

The carefully planned intervention of President Vladimir Putin Wednesday held out hope for increased flow, despite the fact that there was an unspoken subtext that this would require allowing shipments via the Nord Stream 2 pipe to begin quickly. He was also scathing of Europe’s attempts to give the spot market a greater role in price formation and repeated Russia’s offer of new long-term contracts, and its continued desire to own and operate storage facilities in Europe.

Both points are still subject to strong opposition from Europe’s political elite, who believe they have the right to be opposed for security of supply. However, the European economy’s precarious position may undermine that.  German industrial production fell 4% on the month in August, the second set of disappointing data from Europe’s biggest economy in as many days.

3. Stocks will open higher, weekly unemployment claims eyed

The debt ceiling agreement as well as the relief from rising energy prices are expected to support U.S. stock markets and extend recovery.

At 6:15 AM ET (1115 GMT), the points were up 195 or 0.6% at their highest level in 10 consecutive days. Meanwhile, they had been up 0.7%, and were up 1.0%.  

Amazon and Royal Dutch Shell (LON) are two stocks that will likely be under spotlight later. The latter was affected by a massive hack to its Twitch channel. Royal Dutch Shell (LON), however, said that they expect a large boost to cash flow in spite of the 400 million losses from Hurricane Ida.  ConAgra Foods reports on earnings. This sheds new light on companies’ ability to pass on higher input costs to their customers.

Heading the data calendar are weekly jobless claims and John Williams, New York Federal Reserve chief, is set to speak.

4. Biden – Xi meeting agreed

The White House announced that Joe Biden, U.S. president, and Xi Jinping, his Chinese counterpart, have reached an agreement to meet virtually by the end the year.  The news adds to signs of a thaw in U.S.-Chinese relations, despite the Biden administration’s refusal so far to lift any of the sanctions imposed by his predecessor Donald Trump.

Zurich official briefed media on the fact that discussions were much more fruitful than those held in Anchorage (Alaska) a few months ago.

The development follows the resolution of a long-standing issue in bilateral relations in September, which saw Huawei’s chief financial officer released from custody in Canada and allowed to return home, in return for agreeing to a statement of fact from the Justice Department that will gives the U.S. a stronger legal case for sanctions against the Chinese telecoms firm.

5. According to SPR, Oil inventories fall.

Overnight, crude oil prices dropped due to a drop in natural gas prices. This was exacerbated by news that the U.S. might sell its Strategic Petroleum Reserve oil. This is in addition to the surprising 2 million barrel rise in U.S. stocks last week, according to government data.

Biden’s administration could also be looking at reintroducing the ban on crude oil exports that was lifted in 2016 by Donald Trump.

Futures fell 1.7% to $76.08 per barrel by 6:30 AM ET. They were also down 1.3% to $80.08 per barrel