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North American Morning Briefing: Stock Futures Slump on Recession Worries


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Canada CPI for May

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Stock futures tumbled Wednesday, eating into a good chunk of the previous session's gains, as investors went back to worrying that the Federal Reserve's aggressive plans to tighten monetary policy could lead the U.S. into a recession.

Jerome Powell will appear before the Senate Committee on Banking, Housing, and Urban Affairs just as the markets open Wednesday.

The Fed has been raising interest rates in a move to cool historically high inflation, which has led to fears on Wall Street that the central bank's effort will lead the U.S. to an economic downturn. The S&P 500, despite the gains Tuesday, has declined 21% this year.

"The bounce in U.S. stocks after Monday's holiday shows signs of being short-lived given that there was no major data out to support an ongoing buying spree," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

"U.S. futures point to a lower open for Wall Street, an indication that pessimism is seeping back into investor sentiment about the Fed's ability to cool down inflation without inducing a cold shock for the U.S. economy."

Lawmakers will be pressing Powell on Wednesday, and again on Thursday when he faces the House Financial Services Committee, about inflation and the growing threat of a recession.

Read Powell Goes to Capital Hill Today. Here's What to Watch.

Overseas, the pan-continental Stoxx Europe 600 declined 1.5% while major indexes in Asia closed with losses.


The dollar was higher in Europe as investors digested remarks from the Fed's Thomas Barkin, signaling further substantial interest rate hikes and awaited Jerome Powell's testimony before Congress.

"It does not seem the Fed considers the 21% year-to-date decline in the S&P 500 as representing anything being broken and the Fed's current rhetoric is that the U.S. economy can handle higher rates," said ING.

Expect this message to be communicated again at Powell's testimony, ING added.


Sterling edged lower after data showed U.K. inflation accelerated moderately in May, but undershooting market expectations.

Inflation climbed to an annual rate of 9.1% in May from 9% in April. Economists polled by the WSJ expected inflation to reach 9.2%.

"The modest rise in inflation...won't prevent the Bank of England from raising interest rates further, but it may encourage it to opt again for a 25 basis points rate hike at its next meeting in August rather than upping the ante with a 50bps hike," said Capital Economics.

Read Bitcoin, Other Crypto Assets Retreat as Volatility Reigns


Oil prices fell around 5% in European trade, as fresh concerns about tightening monetary policy and recession risks battered risk assets. Investors remain on edge about rising interest rates, which threaten to tip the global economy into recession.

"What was thought to be the ultimate hedge sees energy investors running for the exits as global policymakers get inspired to drive energy prices lower," wrote Stephen Innes, Managing Partner at SPI Asset Management.

Read from the IEA:

Rising Cost of Clean Energy Materials Adds Headwinds for Uptake

Oil-And-Gas Windfall Should Be Invested in Clean Energy


Gold futures stretched their losses into a third trading session, as investors bought the dollar and Treasurys on persistent worries over inflation.

"Despite the noise of the past week, [gold] remains anchored in the middle of its one-month range," said OANDA's Jeffrey Halley, putting resistance at $1860 and support at $1805.

SPI's Stephen Innes referred to gold as "the unsinkable Molly Brown" despite a 40 basis point rise in Treasury real yields, which would "typically be worth at least $75 an oz decline."




TPG Capital Pivots to Take Convey Health Private

TPG Inc. is reversing course to take private Convey Health Solutions Holdings Inc. about a year after backing a public listing for the medical payments technology company as its majority owner.

The private-equity firm remained Convey's majority shareholder through its TPG Capital arm even after the initial public offering in June 2021. On Tuesday, TPG offered to pay $10.50 a share to buy the roughly 25% of the company's outstanding stock that it doesn't already own in a deal with an enterprise value of about $1.1 billion.


Kellogg's CFO Faces Challenge of Splitting Balance Sheet Three Ways

Kellogg Co.'s finance chief, Amit Banati, is tackling the task of splitting his company's balance sheet into three pieces following the food maker's decision to spin off its cereal and plant-based food businesses.

Kellogg-owner of popular grocery brands including Pringles, Frosted Flakes and Froot Loops-said Tuesday it plans to break apart into three separate companies to make each more nimble and focused.


Bankrupt Zohar Loan Funds to Be Handed Over to Investors

The Zohar investment funds founded by Lynn Tilton won court approval to turn themselves over to MBIA Inc. and other creditors under a bankruptcy liquidation plan, though the decadelong legal fight between them and the turnaround manager will drag on.

Judge Karen Owens of the U.S. Bankruptcy Court in Wilmington, Del., approved a chapter 11 plan for the Zohar funds, investment vehicles Ms. Tilton assembled to raise $2.5 billion from investors and channel it into dozens of troubled businesses she ran.


Blackstone's Crown Allowed to Open Sydney Casino After Takeover

Blackstone Inc.'s roughly $6 billion bet on acquiring beleaguered Australian casino operator Crown Resorts yielded an early dividend for the American private equity giant after a local regulator granted permission for Crown to open its new casino in Sydney.

On Wednesday, the casino regulator in Australia's New South Wales state gave Crown a provisional license to open gaming at the $1.53 billion waterfront complex near Sydney's iconic Harbour Bridge and Opera House. Crown Sydney's hotel has been open since December 2020, but the casino launch was delayed. Crown had to convince the regulator that it was suitable to hold the necessary license after Crown was investigated for money laundering and other improper business practices.


Novartis Loses in Appeal Over Gilenya Patent

Novartis AG said late yesterday that a U.S. appeals court has changed course over a litigation regarding the exclusivity of its multiple sclerosis blockbuster drug Gilenya and that it plans to challenge the decision.

The Swiss pharmaceutical company said a modified panel of three judges of the U.S. Court of Appeals for the Federal Circuit had found its patent on Gilenya invalid, reversing the court's earlier ruling.


Chinese Electric-Car Maker Li Auto Jumps After Unveiling New Vehicle Model

Shares of Li Auto Inc. soared in Wednesday trading, as investors welcomed the launch of the Chinese electric-car maker's new, second-ever vehicle model.

The stock jumped as much as 12% in Hong Kong within an hour of trading, briefly hitting a record of 154 Hong Kong dollars (US$19.6). Shares were last up 9.1%.


S&P Downgrades Chinese Property Developer Greenland

Greenland Holding Group Co. has been downgraded to "selective default" by S&P Global Ratings after it extended the maturity of an offshore bond, making it the latest Chinese property developer to be considered in default amid a prolonged sector downturn.

The move comes after the developer completed a one-year maturity extension for a $500 million bond due June 25, S&P said Wednesday.


Lawyers Make Final Arguments in Fraud Case Against Former Theranos President

Government prosecutors in the criminal-fraud trial of Theranos Inc.'s former second-in-command, Ramesh "Sunny" Balwani, made their final pitch to the jury in closing arguments Tuesday, as the Silicon Valley case moves closer to a resolution.

Assistant U.S. Attorney Jeff Schenk said that Mr. Balwani, longtime president and chief operating officer of the now-defunct blood-testing startup, had full knowledge of the fraud he was committing because he was in charge of Theranos's laboratory and was well-informed of its many problems with test accuracy and reliability-and fired employees who raised concerns.


Pornhub Parent Company's CEO, COO Are Departing as Scrutiny Builds Over Alleged Nonconsensual Content

Two top executives at the parent company of major pornography site Pornhub have resigned, the company said Tuesday, amid scrutiny of alleged nonconsensual sexually explicit videos hosted on the site.

MindGeek Chief Executive Feras Antoon and Chief Operating Officer David Tassillo are leaving, the privately held company said in a statement. The leadership changes have been in the works since early 2022, MindGeek said. Messrs. Antoon and Tassillo will remain shareholders, the company said.


Canada to Compel YouTube, TikTok and Streamers to Boost Domestic Content

OTTAWA-Canada approved legislation that targets what video- and audio-sharing platforms like YouTube and TikTok can broadcast to a Canadian audience, as the country follows in Europe's footsteps in imposing a heftier regulatory burden on the digital sector.

This marks the second attempt in as many years by Canada's Liberal government to compel digital platforms, including streaming companies like Netflix Inc., to prominently feature Canadian artists on their services when users with a Canadian internet-protocol address log in. As contemplated under the new measures, users who search for music, television programming, films or do-it-yourself video shorts would get results incorporating a certain quota of Canadian-made content.


Biden Expected to Call for Temporary Federal Gasoline Tax Suspension

WASHINGTON-President Biden is planning to call for a temporary suspension of the federal gasoline tax, according to people familiar with the matter.

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June 22, 2022 04:47 ET (08:47 GMT)

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