Euro Parity Party, Twitter Fights Back, Oil Outlooks – What’s Moving Markets

The euro hits parity with the dollar for the first time in 20 years as German economic sentiment collapses. Twitter’s lawyers get to work on earning their money while Elon Musk trades barbs with Donald Trump. Stocks are set to open lower as recession fears continue to dominate, but Pepsi reports better-than-expected earnings. The race to be British Prime Minister cranks up and OPEC and the U.S. government present their respective views on the oil market. Here’s what you need to know in financial markets on Tuesday, July 12.

1. Euro hits parity against dollar as ZEW tumbles

The euro traded at $1 – according to some trading systems – for the first time in 20 years, as fears of an energy-driven recession continued to undermine the single currency.

However, it failed to hold below that level, apparently supported with intense vigor by traders defending barrier options positions.

That was despite the first of the month’s important sentiment surveys from Germany showing that business expectations among economists fell to their lowest level since the depths of the euro crisis in 2011. The ZEW economic sentiment indicator fell to -53.8 from -28.0, a much steeper drop than forecast. The survey came a day after Russia stopped all gas shipments to its largest customer in Europe, as a planned maintenance period compounded an earlier cut that the German government said was politically motivated.

2. Twitter’s riposte overshadowed by Trump-Musk sniping

Twitter’s lawyers responded robustly to claims by Elon Musk that his decision to abandon the proposed $44 billion takeover was caused by a “material adverse effect”, exonerating him from the obligation to go through with the deal.

“Twitter has breached none of its obligations under the agreement, and Twitter has not suffered and is not likely to suffer a company material adverse effect,” according to a letter drafted by its new legal team.

Twitter (NYSE:TWTR) stock fell 11% on Monday to its lowest since March, before Musk made his initial offer, while Tesla (NASDAQ:TSLA) stock fell some 6.5%. Both stocks edged lower in premarket on Tuesday amid concerns that neither side will emerge from the looming legal battle with its reputation undamaged.

Elsewhere, Donald Trump decried Musk’s “rotten” bid and talked up his own social media platform, calling Musk a “bulls**t artist”. Musk replied – on Twitter, naturally – that Trump should “hang up his hat & sail into the sunset”.

3. Stocks set to open lower; Pepsi earnings in focus; Barkin speech eyed

U.S. stock markets are set to open lower again, with recession fears still paramount despite the evidence of a still-strong economy in Friday’s jobs report. Worrying reports of a further rise in COVID cases in Shanghai that could escalate into a fresh lockdown are also weighing on sentiment.

By 06:20 AM ET, Dow Jones futures were down 193 points, or 0.6%, while S&P 500 futures were down 0.5%, and Nasdaq 100 futures were down 0.4%.

Stocks likely to be in focus later include Pepsico (NASDAQ:PEP), which outperformed in premarket after reporting better-than-expected quarterly numbers, and Gap (NYSE:GPS), which parted ways with its CEO Sonia Syngal after it was caught cold by the sudden slowdown in consumer demand this spring.

Richmond Fed President Tom Barkin is due to speak at 12:30 PM ET.

4. Tories at the starting gate

The race to succeed Boris Johnson as Prime Minister of Britain gets going in earnest later, with candidates required to drum up the support of 20 sitting Conservative Members of Parliament to make it on to the first-round ballot later this evening. A second ballot is slated for Wednesday which will require the support of 30 of the Tory party’s 380-odd lawmakers.

Earlier, former Chancellor of the Exchequer Rishi Sunak won the support of Deputy Prime Minister Dominic Raab and former party chairman Grant Shapps. However, he faces stiff resistance due to his active role in bringing Johnson down and his insistence on not making unfunded tax cuts – something that most of the other candidates are more relaxed about.

The election process is due to be wrapped up by September 5, with a two-way choice presented to the national party membership if MPs can’t agree on a leader by themselves.

5. Oil falls ahead of OPEC, STEO reports; WASDE, API numbers due

Crude oil prices fell, following the broader risk-off move that also took other industrial commodities lower. Risk assets such as crypto also suffered, with Bitcoin falling back below $20,000.

By 06:30 AM ET, U.S. crude futures were down 2.5% at $101.45 a barrel, while Brent futures were down 2.2% at $104.73 a barrel.

The Organization of Petroleum Exporting Countries will update its forecasts for global supply and demand in its monthly report later, while the U.S. government’s Short-Term Energy Outlook comes out at 12:00 PM ET and the American Petroleum Institute’s weekly inventory data are out at 04:30 PM ET.

The Agriculture Department’s latest crop updates will meanwhile be included in the monthly WASDE report, also due at 12:00 PM ET.