The big news: Powell's trade and the weakening of the dollar

Investing.com - The dollar is weakening as weak U.S. industrial production data raise new doubts about the strength of the country's economic recovery. Allegations of insider trading by the Federal Reserve are peaking. The U.S. market will open higher as the reporting season begins, with Johnson & Johnson (NYSE:JNJ), Procter & Gamble (NYSE:PG) and Netflix (NASDAQ:NFLX) reporting their results after the close. Europe's energy crisis is weakening as the winds of change begin to blow and some forecasts of better weather are limiting demand, but the oil market is still tight as a string while OPEC struggles to increase production.

1. The dollar falls after the release of industrial production data
The dollar fell to a three-week low and U.S. Treasury bond yields also fell after industrial production data showed that U.S. businesses increasingly faced supply chain disruptions in September.
A cheaper dollar spurred buyers of commodities, which are still thriving at a time of increased global demand supported by global stimulus. Falling industrial metal prices, exacerbated by production constraints at Chinese steel mills, widened, and spot premiums on copper, tin and nickel rose sharply.
Commodity currencies showed the biggest gains, with the oil-sensitive Russian ruble and Australian and New Zealand dollars hitting new highs as traders began to price in the tightening policies of the central banks behind them.

2. Powell's revelations affect his re-nomination prospects

Federal Reserve Chairman Jerome Powell sold $1 million to $5 million worth of stocks from his personal portfolio last October, just one day before the market plummeted.

The American Prospect (TAP) newspaper, which first reported the story, attributed Powell's actions to the Trump administration rejecting his call for more fiscal stimulus as the economy slowed due to a wave of COVID-19 infections. The Fed did not comment on the TAP story, but other news outlets said that Powell's actions were consistent with the official trade guidance.

This is possible, but the accusations were made at the wrong time for Powell as he struggles to secure a second term as head of the central bank, overcoming increasingly stiff opposition from the progressive wing of the Democratic Party, led by Senator Elizabeth Warren.

Powell had just ousted the heads of the Federal Reserve's two regional banks, Robert Kaplan and Eric Rosengren, after it was revealed that they were actively trading in 2020. Fed Vice Chairman Richard Clarida, whose term expires in January, was also actively trading ahead of Powell's speech in October.
3. The stock market and Netflix.
The U.S. stock market will open higher this afternoon, dominated by corporate earnings and speeches from central bank officials.
By 06:15 a.m. ET (10:15 a.m. GMT), the Dow Jones futures were up 143 points or 0.4%, the S&P 500 futures were up 0.5% and the Nasdaq 100 futures were up 0.4%. The market was choppy Monday, with the Dow Jones Index falling and the other two indices showing strong gains.
Johnson & Johnson, Procter & Gamble, Philip Morris International Inc (NYSE:PM) and The Travelers Companies Inc (NYSE:TRV)will report their earnings before the open, while Netflix will lead the list of those reporting after the close with support from United Airlines and Omnicom.
U.S. housing starts and building permits for September are the only important economic data. And the latter figure is expected to decline after two strong summer months.
4. Winds of Change Calm Europe
The winds of change have returned to Europe, lowering wholesale electricity and gas prices, which nevertheless remain well above acceptable levels. Benchmark gas futures for the coming month in the Netherlands fell to just over 90 euros per megawatt hour, down about 40 percent from last week's peak. Day-ahead prices for benchmark electricity in Germany fell more than 50 percent to 64.50 euros/MWh.
Wind power in the U.K. and Germany, the two largest sources of this type of energy in Europe, is expected to reach record highs this week, while higher-than-expected temperatures will limit demand for heating.
Weather forecasts quoted by The Weather Co. newswires suggest the warm weather will continue through November, giving utilities and industry some respite as they seek to meet fuel demands.
5. Oil strengthens before API data release
However, crude oil prices have regained momentum to test the seven-year highs reached on Monday amid lingering concerns that OPEC simply won't be able to increase production as planned.
According to various news reports, Nigeria and Angola produced below quota again last month, and Saudi Arabia did not fill the gap given its bitter battle with the United Arab Emirates for market share at last month's OPEC+ meeting.
Oil prices are now at levels where major exporters have routinely broken production discipline in the past. WTI crude prices rose 1.3% to $83.28 a barrel and Brent crude futures rose 0.9% to $85.12 a barrel. The American Petroleum Institute (API), as usual, will provide its weekly estimate of U.S. oil inventories at 4:30 p.m. ET (8:30 p.m. GMT).

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