Geoffrey Smith 

Investing.com – The strength of U.S. economy recovery is being questioned by the weak dollar as the U.S. produces less industrial production data. The Federal Reserve is accused of insider trading. Stocks are set to open higher as earnings season cranks up: results are due from Johnson & Johnson (NYSE:), Procter & Gamble (NYSE:) and, after the bell, Netflix (NASDAQ:). Europe’s current energy crisis has a easing effect as some mild forecasts predict a lower demand and the wind begins to blow, however the oil market remains as tight as if OPEC is trying to boost output. This is what you should know about financial markets Tuesday 19 October.

1. Inflation narrative dented by output data: Dollar falls as dollar weakens

Following September industrial production data that showed U.S. plants increasingly experiencing supply chain disruptions, dollar dropped to a 3-week low. U.S. Treasury yields fell as well.

Buyers of commodities were encouraged by the lower cost dollar. They are still in good shape during a high level of global demand, supported by world stimulus programs. Spot premiums for nickel, tin, and tin have increased sharply due to the squeezes in industrial metals.

These currencies are the most important gainers. The oil-sensitive ruble as well as the Australian/New Zealand dollars hit new highs. This was because traders began to adjust their pricing for tightening by central banks.

 2. Powell trade revelations give clout to re-nomination outlook

Federal Reserve Chairman Jerome Powell, who was selling stocks from his private portfolio between $1million and $5million in October 2013, just a few days before the sharp fall of the stock market.

The American Prospect, which first reported the news, framed Powell’s action as a result of the Trump administration’s rejection of his plea for more fiscal stimulus as the economy slowed under a wave of Covid-19 infections. The Fed didn’t comment for TAP’s story but other newswire reports said Powell’s actions were in line with official guidelines on trading.

That’s as maybe, but the allegations come at a bad time for Powell as he battles to win a second term at the head of the central bank, against increasingly stiff resistance from the progressive wing of the Democratic Party, led by Senator Elizabeth Warren.

After revelations they actively traded on the market in 2020, Robert Kaplan, and Eric Rosengren were forced to resign as regional Fed Presidents.  Richard Clarida Vice-Chair, whose term is up in January and ends in October, was also active in trading on the eve Powell’s speech.

3. Stocks/Netflix

Stocks in the United States are expected to rise on an event that will be heavily dominated by central bank speeches and corporate earnings.

They were at 6:15 AM ET (1115 GMT) and had risen xxxx% or x.x%. By 0.x% they were also up. On Monday the market was uneventful with the Dow dropping and other indices doing well.

Johnson & Johnson, Procter & Gamble, Philip Morris (NYSE:) and Travelers (NYSE:) all report earnings before the open, while Netflix tops the bill after the close, with supporting acts from United Airlines and Omnicom.

Only economic data to be noted are housing starts and September building permits data. The former is expected to drop after two solid summer months.

4. Europe feels the relief of wind-of-change

Europe saw the wind return, taking away wholesale power from Europe and gas prices which remain high above sustainability levels. Front-month benchmark gas futures in the Netherlands weakened too just over 90 euros a megawatt-hour, down some 40% from last week’s peak. German baseload prices for the day fell more than 50% to 64.50 EUR/MWh.

Wind generation in the U.K. and Germany, Europe’s two biggest sources of wind power, is expected to hit an all-time high this week, while warmer-than-expected temperatures are set to keep heating demand limited.

The Weather Co reports that warm weather should last until November according to forecasts. This will allow utilities and industrial customers to have some breathing room as they try to fuel their needs.

5. API data ahead of oil

Crude oil prices, however, regained momentum to test the seven-year highs they hit on Monday, amid lingering worries that OPEC simply isn’t able to increase production as planned.  

Nigeria and Angola both produced below their quota again last month, according to various newswire reports, and Saudi Arabia has not filled the gap, mindful of the bad-tempered fight it had with the United Arab Emirates over market share at last month’s OPEC+ meeting.  

The oil prices have reached a point where major exporters’ production control has been prone to collapse. Oil prices rose by 1.3% to $83.28/barrel, and futures went up 0.9% to $85.12/barrel. As usual, at 4:30 PM the American Petroleum Institute releases weekly inventory estimates.