The Daily Chase: Markets await Powell testimony

Here are five things you need to know this morning.

Powell speaks: All eyes will be on the U.S. Federal Reserve chairman today as Jerome Powell is set to testify before lawmakers this morning. After setting yet another round of all-time-highs on Monday, markets are in positive territory this morning ahead of Powell’s comments, but that could change in a hurry, depending on what happens. Trading on the swaps market suggests investors see little chance of a rate cut when the Fed meets at the end of this month, but the odds of one jump to almost 75 per cent at the next meeting in September. With other central banks around the world having already started easing, the question of when the Fed will go is not an academic one: every day they stay on the sidelines is another reason for strength in the U.S. dollar, and another reason for investors to keep sitting on the more than US$6 trillion that’s sitting on the sidelines in cash right now, collecting risk-free yield. Any suggestion by Powell that the Fed is ready to cut could open the floodgates, but as Anders Persson, chief investment office at Nuveen, told Bloomberg this morning, “until they see the Fed truly cutting, there is a level of ‘show-me.’”

Maple Leaf Foods to spin off pork business: There’s an interesting bit of corporate news in Canada this morning as TSX-listed Maple Leaf Food has announced plans to spin off its pork business and thus turn itself into two independent publicly-traded companies. Maple Leaf would retain a 19.9 per cent interest in the as-yet-unnamed company, and the two companies would enter into a supply agreement that would give Maple Leaf steady access to product, and give the new company a distribution broker in the form of one of the largest packaged food companies in Canada. The deal is expected to be completed in 2025 and has the sign-off of the McCain family that controls the business.

Oil price eases as Beryl passes: The threat of Hurricane Beryl has caused oil prices to strengthen over the past week on concerns that there could be major impacts on energy infrastructure in her path, but as the storm passes over the U.S. mainland with much less strength, those fears are starting to dissipate. Enbridge closed a natural gas storage facility in Texas as a precaution. The facility in question is near Houston, a city that is experiencing power outages as a result of the storm, but ultimately no major energy infrastructure assets seem to have been damaged. Oil major Shell has redeployed personnel to its Perdido platform in the Gulf. West Texas Intermediate oil is changing hands this morning at about US$81 per barrel. That’s down about $3 from Friday’s level, when the storm was still gathering strength over the Caribbean.