Crypto Rout, PPI, SEC Probing Musk - What's Moving Markets

© Reuters

By Geoffrey Smith

Investing.com -- The world's most important stablecoin, Tether, wobbles as the rout in crypto deepens. The U.S. producer price index for April is due, a day after another unsettling report for consumer inflation. Stocks are set to extend their losses into a sixth day, and even solid gains in streaming can't help Walt Disney (NYSE:DIS). The SEC is probing Elon Musk's late disclosures in his bid for Twitter (NYSE:TWTR), and oil is down amid the general decline in risk assets. Here's what you need to know in financial markets on Thursday, 12th May.

1. Tether wobbles as crypto rout deepens

The world's biggest stablecoin fell below its notional peg of 1:1 against the dollar on Thursday as the global selloff in cryptocurrencies deepened.

Tether dipped as low as was trading at 93.35 cents in early trading in Europe - over 6.5% below its peg - but recovered most of its losses after Tether's chief technology officer Paolo Ardoino said in an interview broadcast on Twitter that the majority of Tether's reserves are now held in risk-free U.S. Treasuries.  He said that the Tether network was meeting redemption demand “without a sweat drop.”

Redemption demand is surging as crypto investors head for the exits after the collapse of assets linked to TerraUSD, a stablecoin that was backed largely by Bitcoin and algorithmic trading. Bitcoin fell over 12% to its lowest since December 2020, while Ethereum fell over 22%. The only beneficiary of the move was USD Coin, a stablecoin which, like Tether, is backed by dollar reserves. 

2. PPI, Jobless Claims due

The latest act in the U.S. inflation drama is due at 8:30 AM ET (1230 GMT), with the release of producer price inflation for April. Analysts expect factory gate prices to have risen by only 0.5%, a slowdown from 1.4% in March. That should take the annual PPI down to 10.7% from 11.2%.

The figures come a day after the monthly consumer price inflation report showed a mixed picture, with strong increases in demand for travel and further solid rises in food and shelter prices, but with declines in prices for the kind of goods – especially used cars – that were so in demand a year ago.

At the same time, the Labor Department will also release the week’s jobless claims numbers.  Initial claims are expected to hover just below the 200,000 level, despite a surprisingly strong uptick last week.

3. Stocks set to extend losses; Disney down despite streaming gains

U.S. stocks are set to extend their losses at the open, unable to shake fears about a growth slowdown as central banks around the world act to tackle runaway inflation (except in China, where the growth slowdown is the result of a real estate crisis and heavy-handed pandemic management).

By 6:15 AM ET, Dow Jones futures were down 207 points, or 0.7%, while S&P 500 futures were down 0.8% and Nasdaq 100 futures were down 1.2%.

Stocks likely to be in focus include Walt Disney, which is set to open down nearly 5% at a two-year low in response to weaker-than-expected earnings after the bell on Wednesday. That’s despite the fact that its Disney+ streaming network – under much scrutiny in the wake of Netflix’s shock subscriber decline in the first quarter – added nearly 8 million new subscribers, well above expectations.

Any disappointment at the Mouse House should pale into comparison with Softbank (OTC:SFTBY), which reported a $13 billion loss for the fiscal year just ended, due to massive writedowns on some of its holdings such as ride-hailing company Didi Global (NYSE:DIDI), Singaporean peer Grab (NASDAQ:GRAB) and food delivery company DoorDash (NYSE:DASH). Softbank stock lost 8% in Tokyo overnight.

4. SEC probes Musk’s Twitter disclosures - WSJ

The Securities and Exchanges Commission is investigating Elon Musk’s late disclosure of his stake in Twitter, according to The Wall Street Journal, which cited people familiar with the matter late on Wednesday.

Musk disclosed the scale of his buying 10 days later than SEC rules would allow. That let him buy more stock without alerting others to the fact.

The news is unlikely to help smooth Musk’s planned acquisition of the social media platform, given its already-contentious political dimension. Further declines in the value of Tesla (NASDAQ:TSLA) stock, which Musk intended to pledge as collateral for part of his buyout loan, are also complicating the process. Twitter stock is set to open at $45.26, the lowest it has been since Musk made his offer to take the company private at $54.20 a share.

5. Oil down but IEA warns of continued tightness in fuel markets

Crude oil prices fell on Wednesday, unable to escape the global growth fears weighing on risk assets around the world.

By 6:30 AM ET, U.S. crude prices were down 1.6% at $104.02 a barrel, while Brent crude was down 1.5% at $105.87 a barrel.

In a monthly report on the state of the oil market published earlier, the International Energy Agency kept its forecasts for global supply and demand roughly stable but warned that global fuel markets may face further strain in the months ahead as Chinese demand rebounds following a spate of new Covid lockdowns.