SEC Rules, Yen Slides, Apple Enters BNPL – What’s Moving Markets
2022.06.07 15:45
By Geoffrey Smith
Investing.com — The U.S. Securities and Exchanges Commission prepares to tame the ‘payment for order flow’ business model. The yen hits a new 20-year low as markets grow restless with its yield-capping strategy. An Australian rate hike puts the focus squarely back on inflation and interest rates, denting sentiment toward risk assets. Apple is about to get into the ‘buy now pay later’ business. U.K. Prime Minister Boris Johnson clings to power after being wounded by a no-confidence vote, and oil is drifting ahead of U.S. inventory data. Here’s what you need to know in financial markets on Tuesday, 7th June.
1. SEC takes aim at PFOF
The Securities and Exchanges Commission is drawing up plans that would force more competition for executing investors’ orders, a move with far-reaching consequences for the brokerage industry.
Citing people familiar with the SEC’s planning, The Wall Street Journal reported that the move would upend the business model espoused by the likes of Robinhood (NASDAQ:HOOD), which routinely route their customers’ orders through specific partners in return for fees.
The model came under intense scrutiny last year after hedge fund Citadel was perceived to have leaned on Robinhood to suspend trading in ‘meme stocks’. Citadel denied the suggestions.
The move has been widely anticipated and has contributed to a long decline in stocks such as Robinhood, which has lost over 75% of its value since listing last year. SEC Chairman Gary Gensler is expected to outline his proposed changes in a speech on Wednesday.
2. Yen hits 20-year low as spreads widen; RBA hikes by 50 bps; U.S. 3Y auction eyed
The yen fell to a new 20-year low as a half-point rise in interest rates in Australia underlined the difference between those central banks which are tightening monetary policy and those which aren’t.
Also weighing on the yen was the latest leg up in U.S. Treasury yields, which hit a four-week high overnight after oil and natural gas prices stoked inflation fears on Monday. The Treasury is due to sell three-year notes later.
Investors in U.S. bonds are becoming more cautious ahead of the release of May’s consumer inflation data on Friday, against the backdrop of a labor market report that showed plenty of momentum in the jobs market last month.
3. Stocks set to open lower; Apple gets into BNPL
U.S. stock markets are set to open lower later, giving up Monday’s modest gains but staying essentially range-bound as the CPI release looms over the horizon.
By 6:15 AM ET (1015 GMT), Dow Jones futures were down 161 points, or 0.5%, while S&P 500 futures were down 0.6%, and Nasdaq 100 futures were down 0.8%.
Apple (NASDAQ:AAPL) is likely to draw the most attention in early trading after unveiling an overhaul of its MacBook Air product late on Monday. It also announced its entry into the Buy Now Pay Later business, slicing 5.5% off the value of rival Affirm in the process. Affirm stock was down another 2% in premarket trading.
J.M. Smucker and G-III Apparel head a thinned out earnings roster, while May’s trade data at 8:30 AM ET will shed some light on how quickly companies are pruning their inventory plans.
4. Wounded Johnson to fight on
U.K. Prime Minister Boris Johnson vowed to fight on after seeing off a no-confidence vote from his party’s lawmakers by a relatively narrow margin.
Over 40% of Conservative Members of Parliament voted for the motion, which followed a damning report into illegal partying at 10 Downing Street while the rest of the country observed strict COVID lockdowns.
That’s a bigger rebellion than the one which ultimately forced Johnson’s predecessor Theresa May out of office.
The pound reacted stoically to a result that promises to usher in a prolonged period of drift in British politics as a wounded Johnson desperately searches for policies to restore his battered standing. Defeat at either of two by-elections due in the next weeks may frustrate any such attempts.
5. Oil drifts ahead of API data
Crude oil prices eased a little as market sentiment swung back toward concern over global demand on a day of little market-moving news.
By 6:25 AM ET, U.S. crude futures were down 0.2% at $118.27 a barrel, while Brent was down 0.2% at $119.25 a barrel.
Natural gas prices, meanwhile, continued their record-breaking run, hitting $9.369 per mmBtu, amid frantic demand from Europe for liquefied natural gas to fill the continent’s storage facilities.
The American Petroleum Institute’s weekly inventory data are due at 4:30 PM ET, as usual.
