Short overview of 5 things on August 23

Saudi Arabia warns about oil market action

UK prepares emergency spending to ease price pressures

Poland feels cheated

Apple to make iPhones in India

Oil Market Disconnect

Saudi Arabian Energy Minister Prince Abdulaziz bin Salman said “extreme” volatility and lack of liquidity mean the futures market is increasingly disconnected from fundamentals and OPEC+ may be forced to cut production. Prince Abdulaziz — who represents the largest oil producer in the 23-nation OPEC+ — said futures prices don’t reflect the underlying fundamentals of supply and demand, which may require the group to tighten production when it meets next month to consider output targets. Meanwhile, Russia’s crude shipments surged last week, recovering almost all of the previous slump ahead of a European Union ban on seaborne imports of Russian crude due to come into effect in December.

Emergency Spending

Liz Truss, the front-runner to be Britain’s next prime minister, is preparing to fast-track an emergency spending package to help people cope with surging energy costs, according to a person familiar. The foreign secretary, who is leading the race to take over from Boris Johnson, could announce the measures before Parliament rises on Sept. 22 for a recess. And the energy crisis is sinking the pound, which dropped to the lowest since March 2020. Meanwhile, leadership contender Rishi Sunak indicated he would not serve in a government run by Truss.

Closing the Gap

Apple plans to begin manufacturing the iPhone 14 in India about two months after the product’s initial release out of China, narrowing the gap between the two countries but not closing it completely as some had anticipated. The company has been working with suppliers to ramp up manufacturing in India and shorten the lag in production of the new iPhone, from the typical six to nine months for previous launches. Apple, which has long made most of its iPhones in China, is seeking alternatives as Xi Jinping’s administration clashes with the US government and imposes lockdowns across the country that have disrupted economic activity.

Feeling Cheated

Poland’s justice minister lashed out at the European Union — and took a swipe at Germany — for “stealing” billions in EU funds, as a standoff between Brussels and Warsaw over financing escalates. Justice Minister Zbigniew Ziobro, who leads a euroskeptic party in Poland’s nationalist coalition, accused European Commission President Ursula von der Leyen of “cheating” the Polish government nearly three months after signaling the nation was closer to accessing as much as 35 billion euros ($35 billion) of the bloc’s pandemic recovery funds. The commission, the EU’s executive arm, has made an overhaul of Poland’s judiciary a condition of releasing the financing. 

Coming Up…

European equity futures inched higher as Asian shares dropped amid fears over Fed tightening. The euro fell to a new two-decade low as concerns about the economic prospects for the region continue to mount. Manufacturing and services PMI data across Europe will shed light on private-sector health and sentiment six months into Russia’s war on Ukraine. ECB Executive Board member Fabio Panetta participates in a policy panel in Milan. Minneapolis Fed President Neel Kashkari speaks at an event. German Finance Minister Christian Lindner holds talks with German-speaking counterparts in Switzerland. Zurich Airport, Intuit, Medtronic and are among the day’s earnings.

(Source: Bloomberg, August 23-2022)

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