Russia Pipeline Shock, Mortgage Data, Black Box Found – What’s Moving Markets

Oil prices rise as Russia chokes off a Kazakh oil pipeline claiming it needs to repair storm damage, while U.S. inventories appear to have fallen again last week. The chorus of voices at the Fed calling for actively restrictive policy grows louder. Inflation in the U.K. hits a new 30-year high as the government tries to tackle a cost of living crisis. U.S. stocks are set for a breather at the opening, and China finds the black box from the Boeing (NYSE:BA) 737 that crashed earlier this week. Here’s what you need to know in financial markets on Wednesday, 23rd March.

1. Russia chokes off Kazakh oil pipeline as Europe ramps up debate on sanctions

Oil prices rose again as Europe’s debate over sanctions on Russian energy exports ratcheted up a day ahead of a crucial summit meeting.

Italian Prime Minister Mario Draghi told lawmakers that Russian President Vladimir Putin is not interested in serious peace talks, a conspicuously hawkish tone from a country that is highly dependent on Russian oil and gas. German Chancellor Olaf Scholz, by contrast, reaffirmed his opposition to an immediate embargo, citing the economic costs.

Russia has unilaterally tightened the global oil market overnight by closing the Caspian Pipeline Consortium’s export terminal on the Black Sea, claiming that storm damage needs to be repaired. The 700,000 barrel-a-day link largely carries oil from Kazakhstan to world markets.

U.S. crude prices rose 1.8% to $111.25 a barrel, while Brent rose 2.1% to $117.90 a barrel, ahead of U.S. government data on inventories at 10:30 AM ET. According to the API industry group, crude stockpiles fell by a surprisingly large 4.3 million barrels last week.

2. Dovish Daly adds to calls for faster rate hikes; Mortgage data, new home sales due

San Francisco Federal Reserve President Mary Daly added her voice to those calling for the Fed to raise interest rates above what is seen as the neutral rate in order to bring inflation down.

Daly’s comments follow similar ones from Chair Jerome Powell, governor Chris Waller and St. Louis’ James Bulllard this week, but are notable given that she has been at the dovish end of the spectrum as regards tightening policy in recent months. As such, her comments suggest that a clear majority may be in favor of a 50 basis point rate hike at the Fed’s next meeting.

U.S. bond yields have for now stopped their relentless rise, with the 10-year Treasury yield falling by 2 basis points overnight to 2.36%. Their rise will put a sharp focus on weekly data for mortgage applications and rates at 7 AM ET. New home sales data for February are also due later.

3. Stocks set to take a breather at opening

U.S. stock markets are set to open a little lower on profit-taking after Tuesday’s solid gains.

By 6:20 AM ET, Dow Jones futures were down 83 points, or 0.2%, while S&P 500 futures were down 0.3% and Nasdaq 100 futures were down 0.4%. All three indices had risen on Tuesday, having digested the apparent hawkish shift in Fed policy. The Nasdaq Composite rose 2.0%, taking its gains to 9% over the last week.

Stocks likely to be in focus later include GameStop (NYSE:GME), after some more buying by its chairman Ryan Cohen, as well as Cintas (NASDAQ:CTAS) and General Mills (NYSE:GIS), which report earnings. Walt Disney (NYSE:DIS) stock may also be volatile as employees in Florida step up protests against the state’s new bill on LGBTQ issues, while BuzzFeed (NASDAQ:BZFD) stock is still ticking up in the wake of its decision to close its loss-making newsdesk.

4. U.K. inflation hits 30-year high as cost of living crisis worsens

U.K. inflation hit a 30-year high of 6.2% in February, with continued rapid increases in producer prices stoking fears that the peak in consumer inflation may not come for another eight months.

The figures create a tense backdrop for the government’s spring budget statement, which is expected to contain some substantial giveaways on fuel taxes, following the lead of France, Italy and others. It isn’t clear whether the government will stick to its prior plans to raise national insurance contributions in order to close a budget deficit which has narrowed more sharply than expected in th last couple of months.

Bank of England Governor Andrew Bailey is also scheduled to speak at 8 AM ET (as is Bundesbank head Joachim Nagel, coincidentally)

5. China finds ‘Black Box’ of crashed Boeing

Chinese officials have recovered one of the flight recorders from the Boeing 737-800 that crashed during an internal flight on Monday, according to local media reports.

The discovery should allow for a relatively quick clarification on the cause of the crash.

Elsewhere in China, internet giant Tencent (OTC:TCEHY) reported growth of only 8% in revenue in the last quarter, the slowest on record.

The country’s Covid-19 outbreaks, meanwhile, show no sign of slowing yet, with emergency disease control teams dispatched to 28 of the country’s 31 regions.