By Peter Nurse
Investing.com -- The OECD offers up a bleak assessment of the impact to the global economy this year, as the market looks to the latest U.S. inflation and crude inventories data ahead of the Federal Reserve offering up its outlook for the U.S. economy. Still, the Nasdaq is at an all-time high. Here’s what you need to know in financial markets on Wednesday, June 10th.
1. It’s all about the Fed
The Federal Open Market Committee's two-day meeting ends later Wednesday, and the statement emerging from this get together will form the focus of today’s activity.
The Fed, along with the Treasury and Congress, have pumped trillions in stimulus to support businesses that were forced to shut down because of Covid-19.
“There will be no rate changes,” analysts at Nordea wrote, in their preview piece last week. “The Fed has clearly dismissed the idea of going to negative while also stating that the target range will remain unchanged ‘until the economy has weathered recent events and is on track to achieve maximum employment and price stability’. These goals are Fed miles off from achieving at the moment.”
Thus the focus will be partly on forward guidance tools such as yield curve control, partly on updated economic projections, particularly after Friday’s shock employment report.
2. Coronavirus to provoke worst recession for 100 years - OECD
The Organization for Economic Cooperation and Development revised Wednesday its forecasts for the damage the coronavirus pandemic is likely to do to the global economy, and the news wasn’t good.
“Economic impacts are dire everywhere,” the OECD summarized in its Economic Outlook, saying that the global economy is on track to suffer the worst recession outside of wartime in 100 years.
“The recovery will be slow and the crisis will have long-lasting effects, disproportionately affecting the most vulnerable people.”
The OECD said global growth will contract by 7.6% in 2020, assuming there is a second wave of Covid-19 infections. If a second wave is avoided there would still be a drop of 6% this year.
These figures suggest more than twice the devastation to the global economy than its previous forecast released in early March, before the full extent of the crisis became apparent.
They are also worse than the 5.2% contraction in 2020 the World Bank offered up on Monday, in its latest Global Economic Prospects report.
3. CPI data on the slate
The U.S. consumer price index data for May is scheduled to be released at 8:30 AM ET (12:30 GMT), and is forecast to grow 0.2% in May compared with the same month last year, but to decline 0.1% since April.
Total consumer prices fell 0.8% in April, the sharpest drop since the end of 2008 after energy prices plummeted.
Core CPI, which excludes energy and food prices, is expected to increase 1.3% since last May, but drop 0.1% since April.
Earlier Wednesday, data showed that China's producer prices fell by the sharpest rate in more than four years, dropping 3.7% from a year earlier, the sharpest decline since March 2016.
4. Stocks set to open mixed; Nasdaq at all-time high
U.S. stock markets are set to open mixed, with the tech stocks-dominated Nasdaq Composite index leading the way.
By 6:30 AM (1030 GMT), theDow Jones 30 futures contract was down 113 points or 0.4%, while the S&P 500 futures contract was down 0.3% and the Nasdaq 100 futures contract was 0.1% higher.
The Nasdaq ended at an all-time high for a second straight day Tuesday after briefly rising above the 10,000 mark for the first time. Its gains came on the back of strong gains in tech-related shares, a day after the index became the first of Wall Street's major indexes to confirm a new bull market.
5. Crude inventories data due
Crude oil prices traded lower Wednesday, weighed by the American Petroleum Institute reporting late Tuesday that U.S. crude supplies rose by 8.4 million barrels for the week ended June 5.
This was very different from the small drawdown in stocks that the market was expecting, and raises fears of a supply glut.
Attention now turns to the official weekly crude oil inventories data, at 10:30 AM ET (14:30 GMT). The expectation is for a decline of 1.74 million barrels for the week ending June 5 compared with a decline of just over 2 million barrels the previous week.
Gasoline inventories are also expected to fall 71,000 barrels compared to a gain of 2.8 million barrels.
By 6:30 AM ET, Crude Oil WTI Futures were down 2.7% at $37.89 a barrel, while the global benchmark Brent was 2.2% lower at $40.27 a barrel.
The Australian think tank the Institute for Economics and Peace warned Wednesday that the impact of coronavirus may “result in the collapse of the shale oil industry in the U.S., unless oil prices return to their prior levels.”