Consumer Sentiment, IMF, Disney and MPS - What's Moving Markets

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Consumer Sentiment, IMF, Disney and MPS - What's Moving Markets
Credit: © Reuters.

By Peter Nurse -- U.S. consumer sentiment likely stagnates on Covid worries, crude also suffers, but Disney shines with its latest results. The IMF faces a difficult decision in Belarus, while Italy looks to sell the world’s oldest bank. Here's what you need to know in financial markets on Friday, 13th August.

1. U.S. consumer sentiment faces Covid headwind

Data this week has shown that the U.S. economy is growing robustly, inflation remains an issue and the labor market is rebounding. However, Covid-19 remains a headwind, and this is likely to limit consumer confidence going forward.

The preliminary reading of the U.S. consumer sentiment for August, as reflected in the University of Michigan's Consumer Sentiment Index , is due at 10 AM ET (1400 GMT), and is seen unchanged from last month at 81.2. 

Spurred by the Delta variant, coronavirus cases in the United States have spiked to their highest levels in more than six months, as the debate rages over whether the country should authorise a booster dose of Covid-19 vaccines to avoid another crisis.

Both Pfizer (NYSE: PFE ) and Moderna (NASDAQ: MRNA ) have said it sees the eventual need for booster doses, especially since the Delta variant has caused "breakthrough" infections in fully vaccinated people, but some states are already struggling to persuade some of their population to receive a first shot.

2. Stocks to edge higher; Disney shines

U.S. stocks are set to open marginally higher, set to end the week on a winning note as a positive earnings season comes to an end.

By 5:25 AM ET (0925 GMT), Dow Jones futures were up 50 points, or 0.1%, S&P 500 futures were up 0.1%, and Nasdaq 100 futures edged up by less than 0.1%.

The blue-chip Dow Jones Industrial Average and the broad-based S&P 500 are on track to finish the week with gains, trading 0.8% and 0.6% higher, respectively, to record highs. The tech-heavy Nasdaq Composite has underperformed this week, down 0.1%.

Helping the tone has been a generally strong earnings season, with over 90% of the S&P 500 companies having already reported and about 88% of them beating expectations, according to data from Refinitiv.

Further evidence of this came after the close Thursday, when entertainment giant Walt Disney (NYSE: DIS ) beat expectations for the most recent quarter as its streaming services picked up more customers than expected and pandemic-hit U.S. theme parks returned to profitability.

3. Monte dei Paschi on selling block

The world’s oldest bank is up for sale, with Italian authorities in talks to sell Banca Monte dei Paschi di Siena (MI: BMPS ) to UniCredit (MI: CRDI ), cutting its 64% stake in the Tuscan bank.

Thirteen years of mismanagement turned the country's fourth largest lender into Italy’s biggest banking headache, with failure seen risking the country's financial stability. In July, European banking stress test results indicated that MPS's capital would be wiped out in a slump.

Selling the bank would complete a restructuring of the country's banking industry which has shed 250 billion euros in impaired loans over the past five years, as lenders brace for a new wave of bankruptcies due to the Covid-19 crisis.

4. IMF faces tricky Belarus call

The International Monetary Fund is facing a difficult situation in Belarus, the Eastern European country governed by an authoritarian regime which is currently subjected to sanctions imposed by the U.S. and the European Union.

The Fund is set to hand out almost $1 billion to the country, headed up by President Alexander Lukashenko, despite protestations from some in the West, and the U.S., the IMF’s largest shareholder, in particular. This follows accusations of fraud in last year’s election and his brutal repression of protests that followed. 

Yet, despite these accusations, Lukashenko’s government continues to be recognised by the vast majority of IMF members, and that’s effectively all that’s needed to receive funding, which was approved earlier this month.

The IMF said on Thursday it was monitoring the situation closely, but spokesman Gerry Rice said the fund was guided in its actions by the international community, which "continues to deal with the current government in the country." 

5. Crude slides as delta variant hits demand outlook

Oil prices slipped Friday, amid growing concerns that the spread of the Covid-19 delta variant will curtail oil demand growth as the year progresses.

By 5:25 AM ET, U.S. crude futures were down 0.3% at $68.91 a barrel, while Brent futures dropped 0.2% at $71.19 a barrel.

The growth of the highly-transmissible delta variant has interrupted oil’s strong rally, with the flare-up in China, the second largest consumer of oil in the world, causing the most concern. Authorities there have taken an aggressive approach to containing the outbreak, including shutting down one of the world’s busiest container ports after one case was reported.

The IEA predicted, in a report released Thursday, that demand growth would be half a million barrels per day lower in the second half of the year compared with its estimate last month, citing new Covid-19 restrictions.

Although most of the attention has been on the rise of cases in Asia, the U.S. is not immune to the impact of the new variant. Oilfield services firm Schlumberger (NYSE: SLB ) said Thursday it had withdrawn staff from a conference in Houston next week, citing the area's rise in Covid-19 cases.

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