Stock futures are inching higher at the start of the week as investors seemingly cling to newfound optimism that a bond rout is ending, and the Fed’s rate-hike plans will get pruned due to a global slowdown.
Of course, that’s amid growing discontent around the world from high commodity prices that have driven up food prices, cramped US summer driving plans and left some poorer countries in total crisis. “The real world where companies sell their products isn’t looking too special for H2,” writes OANDA’s Jeffrey Hally.
That brings us to a literal off-the-grid call of the day from Cornerstone Futures’ Brynne Kelly who warns the next black swan for markets could be failing power grids and electricity shortages.
“Problems with power grids across the US, and other countries are a potential catalyst for chaos in energy markets that are underappreciated,” energy trader Kelly writes in a new analysis.
She notes that while high-profile commodities like gasoline gets lots of media attention due to readily available price points, electricity lacks liquid benchmark futures, and utility rate structures are too complex to understand.
Her two charts below show futures curve shifts for major electricity markets — Pennsylvania/New Jersey/Maryland power grid and Texas’s ERCOT on the right. Both have seen “unprecedented” moves higher this year, but it mostly stays under the radar, she notes.
Cornerstone Futures
That is, until something big happens, like the freak 2021 winter storm in Texas that knocked the state’s lucrative energy companies offline, along with transportation, water distribution and telecoms.
“Simply stated, crude oil does not actually make electricity in today’s environment. However, power is needed to make oil. Said another way, a failing power grid COULD BE the next oil chain supply problem,” she says.
Anything bigger than what was seen in Texas “could be potentially catastrophic,” she warns, as we enter the height of height of the summer cooling season amid rising temperatures. Tokyo’s warnings of heatwave-driven blackout warnings are food for thought.
“There appears to be no plan in place. The power grid, therefore may be the soft underbelly of the entire economy,” said Kelly. She shared the below chart from the US Chamber of Commerce, which showed summer electricity reliability risk and warning that the transition to clean energy was out of sync with realities.
US Chamber of Commerce
And then there’s electric vehicles, of which there are expectations of immense growth, “a user segment of the power grid that is basically nonexistent at the moment,” she said.
And while governments are pulling out the stops to keep oil prices lower, the same can’t be said for the electricity utility industry, said Kelly. Check out the full blog here.
Read: Greta surprises Glastonbury: Stop the oil ‘loopholes,’ she tells roaring crowd
The buzz
Russia defaulted on foreign debt for the first time since the 1917 Bolshevik Revolution. Russian forces struck the capital Kiev over the weekend, hours before G-7 leaders gathered in Bavaria, where they’re due to pledge extended support for Ukraine and a ban on Russian gold exports.
Spirit Airlines
SAVE,
fell in premarket trade after the low-cost carrier agreed to a sweetened buyout from Frontier
ULCC,
spurning the increased offer from JetBlue Airways
JBLU,
Shares of Epizyme
EPZM,
rose 63% after French biotech Ipsen
IPN,
announced a deal to acquire the US oncology drugmaker for around $247 million.
Chinese electronic component makers — BYD Electronic
285,
and AAC Technologies
2018,
among others — jumped in Hong Kong on optimism about potential new orders from Apple
AAPL,
in coming months.
Fresh data shows durable goods orders rose more than forecast in July and pending home-sales are still to come, in a week that will also give us the Fed’s preferred inflation gauge. We’ll also hear from an array of Fed officials this week, including Chairman Jerome Powell.
The markets
US stock futures
YM00,
NQ00,
have pared gainsas bond yields
TMUBMUSD10Y,
push higher.
Oil prices
CL.1,
are slightly higher as traders wait for this week’s OPEC meeting. Bitcoin
BTCUSD,
is just holding above $21,000.
The tickers
These were the most-searched tickers on MarketWatch as of 6 am Eastern Time:
|
Ticker |
Security name |
|
TSLA, |
Tesla |
|
GME, |
GameStop |
|
AMC, |
AMC Entertainment |
|
NIO, |
NIO |
|
MULN, |
Mullen Automative |
|
AAPL, |
Apple |
|
AMZN, |
Amazon |
|
BABA, |
Alibaba |
|
NVDA, |
Nvidia |
|
EVFM, |
Evofem Biosciences |
Random reads
Sex-party planner, Killing Kittens, gets a new investor — the UK Treasury.
Four miles under the surface, A US World War II battleship has become the deepest shipwreck ever found
Ready for hurricanes and other disasters, this all-female startup’s mobile emergency power stations are green and fast
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