Geoffrey Smith 

Investing.com — House of Representatives will approve Democrats’ “Build Back Better” spending bill. Two more key members of Congress will be in the spotlight later as a Federal Reserve policymaker becomes more hawkish. Europe is forced to reorganize as Covid-19-related cases in Germany and Central Europe spiral out of control, sending oil prices to new seven-week lows. This is what you should know about financial markets Friday 19th November. 

1. House to vote on spending bill

The House of Representatives is set to vote Friday on the Democrats’ Build Back Better, a trimmed-down but still extensive package of measures intended to expand the welfare state and accelerate the energy transition.

The bill, which includes provisions for universal prekindergarten places, caps on childcare costs for poorer and middle-income families, the lowering of prescription drug prices and the expansion of  tax credits for cutting carbon emissions, comes with a sticker price of just under $2 trillion over 10 years.

The Congressional Budget Office estimates that while most of this spending can be covered by increased taxes for corporations and wealthy individuals, it will nevertheless increase the overall budget deficit.

2. Europe is locked down once again

Austria announced a total lockdown as a way to reduce the spiraling infection rate. Although the Alpine nation had previously imposed no restrictions on those not vaccinated earlier in the week, infections rose even further.

More worryingly for the European economy, Germany’s outgoing health minister Jens Spahn said that the continent’s biggest economy couldn’t rule out doing the same. On Thursday, the federal and state governments approved new measures to target unvaccinated people. This is a significant improvement on the current record-setting infection rate of 30%.

European stock markets saw a brief, but sharp sell-off following the news. After Christine Lagarde, ECB president again denied the necessity to respond to an increase in inflation, the euro fell below $1.13. German producer price inflation reached 18.4% in October due to rising electricity and gas prices.

3. Stocks to Open Mixed

U.S. stock exchanges are expected to open in mixed conditions later due to the euro lockdown. Cyclicals have been underperforming.

However, overnight the indices climbed 0.4% to 16,546 point, a record. They were 0.4% lower than they were 140 points ago, and 0.4% less than 0.1%.

Apple (NASDAQ) is likely to come under scrutiny later, after Bloomberg reported on Thursday that the company was planning to create a fully autonomous car in 2025. Activision Blizzard also (NASDAQ), has over 1000 employees signing a petition demanding that Bobby Kotick, its veteran CEO, resign.

News from Europe will likely put pressure on airline and cruise stock. Foot locker (NYSE:) reports quarterly earnings.

4. Fed’s Clarida, Waller due to speak after Williams turns hawkish

Is the Federal Reserve becoming more hawkish quickly? Once vice-chair Richard Clarida, governor Christopher Waller have finished speaking, then the market will find out.

Clarida is particularly at the conservative end of the Fed’s opinion spectrum. Therefore, any indication of growing concern about the economic price pressures may indicate that the Fed might accelerate the pace of its asset sales.

Regional Fed Presidents James Bullard and Raphael Bostic have repeated familiar calls for interest rate hikes in 2022 this week, but a more interesting development came on Thursday when one of the Fed’s key swing members, New York Fed President John Williams, warned that price increases had become more broad-based and that the Fed doesn’t want to see long-term inflation expectations rise much further.

5. After lockdown scare, oil struggles

The news that demand-killing locksdown measures were back in effect prompted oil prices to fall by seven weeks. This was compounded by sentiment already hurt by reports about plans by both China’s and U.S. governments for coordinated releases of strategic reserves.

Futures fell 2.6% to $76.40 per barrel by 6:30 AM ET. They were below $80 for only the second time since October early, when they dropped 2.7%, or $79.06 per barrel.

Baker Hughes’ rig count later will give indications of whether expectations for rising U.S. output in the next couple of months are well founded. The CFTC’s net positioning data is also due.