Every day puts Europe one day deeper into an energy crisis

At this point it’s obvious to everyone that the only way that Russia will increase pipeline flows is if it gets sanctions relief. The games around Nord Stream 1 continue and there’s no relief coming.

We saw two spikes in TTF gas prices last winter but those were both on cold weather and were ultimately short-lived events. This time, it’s not weather or a short-term disruption. Gas-burning season is still months away and prospects are darkening.

t this point, the story isn’t really ‘new’ to anyone but 2022 and 2023 bottom-up EPS forecasts for the MSCI Europe index have barely moved. That’s a sign that analysts (and perhaps investors?) are holding out hope that the taps will be turned back on.

Meanwhile, what’s staring right back at them are catastrophically high German power prices.

German power prices

Keep in mind that German markets are some of the worst year-to-date performers (-29%) and the euro has been battered but economic models do a poor job of incorporating something so unusual as a 5x increase in power prices.

The euro this week looked like it might be entering a retracement phase early yesterday as it rose to a one-month high but by the end of the day it had reversed lower. That’s a bearish signal but it will take a break of 1.0097 to confirm it (the late-July low). That could come with the Fed pushing expected rate hikes higher or the ECB backing off on hawkish rhetoric.

eurusd daily chart Aug 3

Federal Reserve speakers coming up on Wednesday, 3 August 2022 – Harker, Barkin, Kashkari

10:30 am NY time (1430 GMT) Federal Reserve Bank of Philadelphia President Patrick Harker

  • speaks on “Using Fintech to Promote Financial Inclusion” before hybrid Federal Reserve Bank of Philadelphia Sixth Annual Fintech Conference

11:45 am NY time (1545 GMT) Federal Reserve Bank of Richmond President Thomas Barkin

  • speaks on “Winning the War on Inflation” before the Shanandoah Valley Partnership

14:30 pm NY time (1830 GMT) Federal Reserve Bank of Minneapolis President Neel Kashkari

  • participates in fireside chat as part of the Journal of Financial Regulation Annual Conference

OK, so of that lot it looks like Barkin will be the on to watch (listen to!). Earlier during the session we had Bullard speaking. He gave no indication of any slow down in the Fed’s fight on inflation:

US House Speaker Pelosi will meet with Taiwan’s biggest semiconductor manufacturer, TMSC

Some encouraging news on semiconductor supply.

As part of US House Speaker Pelosi’s trip to Taiwan she will be meeting with the chair of Taiwan’s biggest semiconductor manufacturer, Taiwan Semiconductor Manufacturing Company (TSMC)

Discussions are expected to centre on implementation of the recently passed (US) Chips and Science Act. The Act provides circa US$52 billion of federal subsidies for domestic chip factories. TMSC is building a chip factory in Arizona. Domestically produced semiconductor chips are seen as important to US national security. China is objecting to Pelosi’s visit to Taiwan, and is also not too keen on US national security.

Info via (gated) Washington Post.


Two day losing streak for the major US indices

The US major indices are ending the day with declines on the day in an up and down session. The Dow led the declines thanks to a sharp decline in Caterpillar shares after their earnings report disappointed. Caterpillar shares fell $11.35 or -5.82% at $183.51. Other losers today in the Dow included:

  • Boeing -3.46%
  • Intel, -2.57%
  • Visa, -2.43%
  • Nike, -2.22%

A look at the final closing numbers shows:

  • Dow fell -402.25 points or -1.23% at 32396.18
  • S&P fell -27.44 points ro -0.67% at 4091.20
  • Nasdaq fell -20.21 points or -0.16% at 12348.77
  • Russell 2000 fell -0.86 points or -0.05% at 1882.44

After the close:

AMD is disappointing:

  • EPS $1.05 vs $1.03 et
  • Rev 6.55B vs 6.53B est

The bad is that they guided lower for the Q3 at 6.5 to 6.9B vs 6.81B

Starbucks earnings:

  • EPS. $0.84 vs $0.75
  • Rev $8.15B vs $8.11B est.


  • Rev 6.8B vs 6.78B est
  • EPS $0.93 vs $0.86 est
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