February 27, 2024
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Written by Jeffrey Smith and Jessica Bahia Milo

Investing.com — The dollar falls and European currencies sigh with relief on signs that the missile that hit Polish territory on Tuesday was, in fact, from a Ukrainian air defense force and not Russia. However, crude oil prices soon found another reason to worry about geopolitical risks.

The US session is likely to focus on the consumer, as retail sales data for October is set to outpace inflation and targeting (NYSE:), TJX (NYSE:), and Lowe’s (NYSE:) followed Walmart’s (NYSE:) impressive results on Tuesday, while Nvidia (NASDAQ:) released its numbers after the market closed.

The inflation picture is going from bad to worse in the UK. In Brazil, expect the PEC Transition Show.

Here’s what you need to know in the financial markets on Wednesday, November 16th.

Check out: Investing.com’s economic calendar

1. Retail sales are poised to outpace inflation. Can Target match Wal-Mart?

The US will release data for October which is expected to outpace monthly price increases for the first time in several months.

Retail sales are expected to rise by 1% compared to September, compared to an increase of only 0.4% in the US. If this is the case, it will restore some hope to market arguments that he can engineer a “soft landing” for the US economy in the coming months.

The overall number is likely to swell due to higher spending on gasoline, but is expected to have increased by 0.4% – also slightly above the 0.3% reading in the US.

The balance sheets of companies in the retail sector should continue with Target and TJX. Lowe’s has really revealed, exceeding expectations both top and bottom line.

US stocks will later open higher after the relatively soft data from Tuesday encouraged hopes of a relatively quick end to the US interest rate hike.

At 9:35 a.m., it was up 0.05%, up 0.01% and down 0.08%. The indexes rose between 0.2% and 1.5% on Tuesday.

While earnings from retailers in the country will attract most of the initial interest, there will also be a focus on electric vehicle makers after Mercedes Benz (ETR:) said it would cut its prices in China by up to 33%.

Nio (NYSE:) and Xpeng (NYSE:ADRs) fell more than 2% before the market, while Tesla (NASDAQ::), which hit a two-year low last week, under pressure from selling shares of CEO Elon Musk, remained flat.

After the close, Nvidia and Cisco (NASDAQ) will finish issuing their earnings for the day.

Check out: Real-time US stock quotes

2. Europe is breathing amid indications that the missile explosion in Poland was not from Russia

European currencies fell and rose after reports downplayed the risk of NATO being drawn deeper into Russia’s war in Ukraine.

Polish President Andrzej Duda said it was “highly likely” that the missile that fell in southeastern Poland on Tuesday, killing two people, was launched by Ukraine’s air defense, not Russia. The missile was apparently one of many launched to counter another devastating wave of attacks on Ukraine’s energy sector, which has knocked out power in cities across the country.

The incident previously raised fears that Russia had struck Poland directly, creating the risk of Poland activating NATO’s mutual defense pledges and forcing NATO to respond directly.

Polish and Hungarian currencies joined the news strongly, while currencies also rose against the dollar.

Check: Pricing of major exchange rates

3. PEC to move in Brazil

The country’s fiscal situation remains in focus today, with the proposed Amendment to the Constitution (PEC) for the transition expected to be introduced. The measure aims to make room in the 2023 budget and remove Auxílio Brasil, which should be renamed Bolsa Família, from the spending cap – at least R$175 billion must be excluded from expenditures. Senate President Rodrigo Pacheco (PSD-MG) defended the Bolsa Família’s withdrawal from the ceiling for four years.

However, even some of the economists who voted for Luis Inacio Lula da Silva (Workers’ Party) were in favor of the ceiling, including Henrique Meirelles and Brisio Arida. Arida, one of the authors of the Real Plan and is part of the transitional team of the elected government, said on Tuesday the 15th of this month that he is against taking Auxílio Brasil’s expenses from the ceiling. In addition, former Finance Minister Henrique Meirelles, who headed the central bank, said the country needed a spending limit/ceiling and advocated an administrative reform to fund the R$600 aid.

Check: Brazilian stock pricing

4. UK inflation hit 11%

Inflation may be declining in the US, but it is still rising sharply in Europe.

The UK rose 11.1% year-on-year in October, thanks to sharp increases in energy and food prices, despite government measures to reduce household energy bills. Prices increased by only 2% compared to the previous year.

The numbers, which were higher than expected, complicate the task of Chancellor of the Exchequer Jeremy Hunt as he prepares to announce the government’s spending and tax plans on Thursday. Those will now have to include another big increase in servicing the UK’s inflation-linked debt, and may have to offer even bigger pay rises to appease public sector workers, whose earnings rose just 2% in the year to September.

It rose after Hunt indicated that the government would not attempt to further disrupt the Bank of England.

Check: Pricing of major global indices

5. Oil fluctuations due to geopolitical fluctuations

Crude oil prices fluctuated sharply overnight under the influence of geopolitical developments. Arriving late on Wednesday in response to news of the missile incident in Poland, they halted early talks as the risk of an escalation in Ukraine receded.

However, a drone attack on an Israeli oil tanker off the coast of Oman, at the tip of the Arabian Peninsula, quickly returned the extra risk premium.

By 9:36 am, it was up 0.03% at $86.95 a barrel, while prices were up 0.35% at $94.19 a barrel.

Weekly US government data on crude oil and distillates is also due on Wednesday.

Check: View the prices of the main commodities