For much of the past year, the rebound in energy prices has seemed like a good thing—a sign of a reviving world. But the surge in prices of nearly all energy sources is now looking more ominous, threatening to derail growth, and even posing a threat to energy companies themselves.
Natural-gas prices hit records in Europe and Asia on Wednesday. Oil prices also hit multiyear highs, then dipped after President Vladimir Putin said Russia would send more gas to Europe this winter. Some analysts argue that high prices will persist. But Citi analyst Alastair Syme wrote this week that “talk of ‘new paradigms’ needs to balance the increasing risk of demand destruction with the world’s energy bill now approaching historic highs.” Costly energy is a “real headwind to the global economy.”
This isn’t just a headache for energy users. Producers could be vulnerable, too. Syme isn’t sure that high prices will last. Shortages can force politicians to curb costs or limit exports. Last month, a U.S. manufacturers trade group asked the Department of Energy to limit exports of natural gas.
Historically, rising oil prices may foretell, or cause, recessions. State Street Global Advisors’ U.S. SPDR chief investment strategist Michael Arone says pricey energy will hurt manufacturing economies like China and Germany, which will have to pay more to run factories, and force consumers in high-consumption countries like the U.S. to shift spending to pay for gasoline. But he doesn’t see a recession or even an interest-rate hike slowing energy-fueled inflation. “I think the Fed and other central banks will hold on to this idea that this is transitory,” he says. They’d be likelier to raise rates “if demand was increasing rapidly.”
Next Week
Monday 10/11
U.S. bond markets are closed in observance of Columbus Day.
The 2021 annual meetings of the World Bank Group and the International Monetary Fund convene primarily in a virtual format. The confab runs through Oct. 17.
Tuesday 10/12
Fastenal reports quarterly results.
The Bureau of Labor Statistics releases the Job Openings and Labor Turnover Survey. Consensus estimate is for 11.1 million job openings on the last business day of August, slightly more than the July figure, which was a record high.
The National Federation of Independent Business releases its Small Business Optimism Index for September. Expectations are for a 99 reading, slightly less than the August data.
Wednesday 10/13
Earnings season kicks off with JPMorgan Chase reporting third-quarter results. The KBW Bank Index has rallied 39% this year as Treasury yields have risen and the Federal Reserve has become more hawkish.
BlackRock , Delta Air Lines , and First Republic Bank release earnings.
Medtronic hosts an investor meeting to discuss its ESG initiatives.
The Federal Open Market Committee releases the minutes for its September monetary-policy meeting.
The BLS reports consumer price data for September. Economists forecast a 5.3% year-over-year rise, which would match the August reading. The core CPI, which excludes volatile food and energy prices, is seen increasing 4%, also even with the August data.
Thursday 10/14
Bank of America , Citigroup , Morgan Stanley , U.S. Bancorp , UnitedHealth Group , Walgreens Boots Alliance , and Wells Fargo hold conference calls on quarterly results.
Hormel Foods hosts an investor meeting to discuss its long-term strategy and key initiatives.
The BLS releases the producer price index for September. Consensus estimate is for a 0.5% month-over-month rise and for the core PPI to gain 0.4%. This compares with increases of 0.7% and 0.6%, respectively, in August.
Friday 10/15
Goldman Sachs Group , J.B. Hunt Transport Services , PNC Financial Services Group , Prologis, and Truist Financial report earnings.
The Census Bureau reports on retail sales spending for September. Consumer spending is expected to decline 0.1% from August to $618 billion. Excluding autos, retail sales are seen rising 0.6% month over month after jumping 1.8% previously.
The University of Michigan releases its Consumer Sentiment Index for October. The consensus call is a for a 74.8 reading, two points more than the September figure. In August, the index hit a decadelong low as consumer concerns about inflation heated up.
Write to Avi Salzman at [email protected]
