Fed Speakers, Terra Infirma, Peloton Earnings

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© Reuters

By Geoffrey Smith 

Investing.com — Speakers from the Federal Reserve will line up to push markets one way or the other, a day after the central bank warned of deteriorating liquidity in key markets. There are signs of stress in crypto, as stablecoin ‘breaks the buck’. Stocks are set to bounce after Monday’s rout, but face some challenges as more ‘profitless tech’ names report ‘earnings’. Tesla (NASDAQ:) is force to go slow on production in Shanghai again, and oil prices hit a one-week low on fears for the global demand outlook. Here’s wehat you need to know in financial markets on Tuesday, 10th May.

1. Incoming! Fed speakers due throughout the day

Get your hard hats ready and prepare for a barrage of Fedspeak. At least five of the U.S. central bank’s top policymakers will make public appearances on Tuesday and their comments may show whether they are still exclusively focused on taming inflation, or whether the prospect of a global slowdown is starting to force a rethink.

First up at 7:40 AM ET (1140 GMT) is New York Fed President , whose status as the Fed’s point man for Wall Street will give his comments particular weight, a day after the Fed warned of worsening liquidity in key financial markets in its latest Financial Stability Report.

He’s followed by Atlanta’s Raphael Bostic at 8:30 AM ET. A lull then follows until 1 PM ET when Governor Christopher Waller and Minneapolis’ Neel Kashkari are both due to speak. Cleveland’s Loretta Mester rounds off the festivities at 3 PM.

The data calendar is otherwise pretty light, with only the NFIB small business survey of note. Its main index was flat at 93.0 in May, a slightly better outcome than expected.

2. Terra Infirma

The signs of financial market stress talked about by the Fed aren’t hard to spot. In addition to ongoing default risks among Chinese property developers and almost any Russian entity from the sovereign down, there have been major spikes in markets for nickel and energy in recent months.

On Monday, it was the turn of crypto, as the ‘stablecoin’ – notionally tied to the dollar –  fell to as low as 69 cents, triggering a wave of redemptions for fiat money.

Terra is an algorithmic stablecoin that relies on arbitraging against other digital assets, rather than asset backing, for its value. While the system designed to keep it stable was partially successful in bringing Terra’s price back up, it was stuck at just over 90c by 6:25 AM ET. Crypto exchange Binance was temporarily forced to limit withdrawals of both Terra and , another digital currency closely tied to it. 

The phenomenon of stablecoins has some parallels with the role of money market funds during the Great Financial Crisis, in so far as both asset classes boil down to a promise of risk-free returns. The realization that the assets backing MMFs in 2008 were less than solid was a major catalyst for the worst of the 2008 carnage. 

3. Stocks set for a bounce but tech reports cast shadow 

U.S. stock markets nonetheless think they’ve priced in quite enough bad news, thank you very much, after another rocky start to the week on Monday.

By 6:25 AM ET, were bouncing 250 points, or 0.8%, while were up 0.9% and were up 1.5%. That represents a recovery of between one-third and 40% of Monday’s losses.

The first test of sentiment this morning will likely come from Peloton (NASDAQ:) and Workhorse (NASDAQ:), given the particularly negative sentiment toward ‘profitless tech’. Sysco (NYSE:), , and are all due to report early, while Occidental Petroleum (NYSE:) and Electronic Arts (NASDAQ:) head the late reporters. Overnight, German chemicals giant impressed , while also beat expectations.

4. Tesla forced to slow Shanghai production again

Tesla (NASDAQ:) has been , Reuters reported citing an internal memo. It attributed the move to to a lack of components arising from the region-wide lockdowns that are now entering their eighth week, after a series of what have turned out to be false dawns with regard to reopening.

Data released earlier the China Passenger Car Association (CPCA) showed that Tesla’s sales in China had fallen 98% in April. 

Shanghai’s lockdowns were also at the heart of two warnings for the German manufacturing sector on Tuesday, with both the think tank and the VDMA engineering industry group .

5. Oil hits one-week low on demand fears; API eyed

Crude oil prices continue to retrace lower amid fears for global growth, with prices still caught in a dynamic between the destruction of Chinese demand and the restriction of Russian supply.

By 6:35 AM ET, futures were down 1.5% at $101.50 a barrel, while futures were down 1.8% at $104.04 a barrel, both blends having earlier touched their lowest point in over a week.

The American Petroleum Institute is due to report its at 4:30 PM ET, against a backdrop of record high diesel prices. Europe, meanwhile, continues to press Hungary to drop its opposition to its planned embargo on Russian oil and refined products, after EU Commission President Ursula von der Leyen left Budapest empty-handed on Monday.

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