U.S. equity futures slumped lower Wednesday, and look poised to give back all of yesterday’s gains, as a surge in global energy prices adds to inflation concerns that could stall the post-pandemic recovery.
With oil prices trading at the highest levels in seven years, thanks in part to price spikes in coal and natural gas that has accelerated energy switching in major economies around the world, benchmark government bond yields are moving north in response to the anticipated inflation effects of the rolling energy crunch.
In the UK, where the nation’s power grid relies heavily on natural gas imports, prices surged by 37% on Wednesday alone to a fresh record high of more than $40 per British Thermal Units, a level that is around eight times higher than spot prices in the United States and the equivalent of around $220 for a barrel of crude oil.
Benchmark 10-year Treasury notes yields jumped to 1.552% in overnight trading, with investors now concerned for both the energy-related impact on inflation and the slowing growth prospects of power shortages around the world.
At the same time, the Atlanta Federal Reserve’s GDPNow forecasting tool, a real-time indicator of U.S. growth, fell to 1.3% in its last reading, with consumption pegged at just 1.1%.
Futures contracts tied to the Dow Jones Industrial Average are indicating a 345 point opening bell gain, while thee broader S&P 500 is priced for a 53 point move to the downside heading into the ADP September jobs report at 8:15 am Eastern time.
Nasdaq Composite futures, meanwhile, are set for a 210 point decline, with Apple (AAPL) – Get Apple Inc. (AAPL) Report marked 1.63% lower at $138.81 each and Microsoft (MSFT) – Get Microsoft Corporation (MSFT) Report down 1.5%.
Facebook (FB) – Get Facebook, Inc. Class A Report shares are also likely to be in focus after CEO Mark Zuckerberg addressed both accusations from a whistleblower that the social media giant prioritizes profits over people, as well as a crippling error that shut down its platforms for six hours earlier this week, in a rare public post late Wednesday.
WTI futures for November delivery were last seen 51 cents lower on the session at $78.42 per barrel while Brent contracts for December, the global pricing benchmark, slipped 49 cents to $82.07 per barrel, near the highest since 2014.
Natural gas prices are on the move, as well, surging nearly 40% in a single day in the United Kingdom and rising nearly 1.5% in the U.S. to $6.40 per British Thermal Units.
In overseas markets, energy price surges in Europe, as well as a disappointing reading for Germany’s August exports, clipped the region-wide Stoxx 600, which fell 1.9% in late-morning trading in Frankfurt.
Overnight in Asia, where markets in China remain closed for the Golden Week holiday celebrations, Japan’s Nikkei 225 slumped 1.05% to close at a six-week low of 27,528.87 points while the region-wide MSCI ex-Japan benchmark fell 0.94% to test the lowest levels in nearly a year.