5 Things You Need to Know to Start Your Day: Americas

Good morning. Traders take a breath before the Fed, Goldman says momentum traders are poised to buy stocks whatever happens this week and th [View in browser]( [Bloomberg]( Good morning. Traders take a breath before the Fed, Goldman says momentum traders are poised to buy stocks whatever happens this week and the earnings deluge continues. Here’s what’s moving markets.— [David Goodman]( Want to receive this newsletter in Spanish? [Sign up to get the Five Things: Spanish Edition newsletter](. Markets pause Global markets look to be [entering a holding pattern]( before tomorrow’s Federal Reserve decision as traders adopt a cautious stance ahead of a meeting that might see Chair Jerome Powell take a [more hawkish turn](. Equities paused their gains on Tuesday amid a flurry of earnings, with S&P 500 futures little changed, while there were no big moves in Treasuries or the dollar before US figures coverings wages and confidence later. The yen was little changed after Bank of Japan [accounts]( suggested Japan likely intervened in the currency on Monday. Goldman on Momentum The week has a lot of event risk — including key US jobs data — but momentum traders are modeled to buy equities over the next week [regardless of market direction](, according to Goldman Sachs’ trading desk. Commodity trading advisers — funds that use systematic strategies to trade futures contracts — are exposed to about $106 billion in long positions, Cullen Morgan wrote. “We now have CTAs as buyers of global equities and the S&P 500 in every scenario over the next week,” he said. Earnings rush It’s another big day for US earnings. Figures from McDonald’s, Coca-Cola and obeisty drugmaker Eli Lilly are out this morning while [Amazon.com]( and Starbucks are due to report after the close. In Europe, shares in carmakers fell after [Mercedes-Benz](, Volkswagen and Stellantis, the owner of the Fiat and Peugeot brands, saw their sales and profit come under pressure in the latest quarter. Quinn Shock Perhaps the biggest shock of the day was from HSBC, which [announced that Chief Executive Officer Noel Quinn is stepping down]( -- an unexpected move that comes as Europe’s largest lender tries to navigate the deterioration of ties between China and the US. The news wasn’t enough to derail the bank’s shares though — they rose more than 3% after a solid earnings report, [accounting for most of the gain in the FTSE 100.]( SocGen Exits Staying in banking, a[ pair of traders in Hong Kong have left Societe Generale]( after the French bank discovered a batch of risky bets that went undetected by the firm’s risk-management systems, Bloomberg’s Alexandre Rajbhandari, Ambereen Choudhury and Donal Griffin report. While SocGen didn’t lose any money from the transactions, the trades could have cost the Paris-based lender hundreds of millions of dollars had an intense market downturn occurred, raising questions about risk management at one of Europe’s biggest banks. What we’ve been reading This is what’s caught our eye over the past 24 hours. - Binance and CZ’s fortunes are set to grow, [jail or no jail](. - [The euro zone’s recession is over](, but inflation is proving sticky. - London firms are letting more staff work[entirely from home.]( - [China’s top leaders]( hint at property support, rate cuts. - Bill Dudley says the Fed’s QE program [cost too much](. And finally, here's what Joe’s interested in this morning For China, electrification of its economy is in large part about national security. It doesn't produce much oil, so the switch to EVs reduces its import needs. With the US though, well... the US is the "Saudi Arabia of oil" as [Heatmap reporter Matt Zeitlin]( puts it. So an EV push here means less immediate need for what we produce in abundance domestically, and greater need for certain critical minerals that are mined more globally. [This was one of Sen. Joe Manchin's big concerns]( in the debate over the Inflation Reduction Act, that China could "weaponize" the supply of key commodities needed for things like batteries. Not only are many of these commodities, such as Lithium, not produced in abundance domestically, the markets for them are illiquid and volatile. High volatility and lack of liquidity creates problems for producers, affecting the economics of new mines. Sure, the long-term demand for lithium may be high, but low prices today may discourage breaking new ground on operations, perpetuating shortages in the future, and so on. To this point, you should [read a new proposal from the think tank Employ America]( by Arnab Datta, Alex Turnbull, and Alex Williams (disclosure: [I play in a band with Alex](, so assume I'm biased). They argue that the Loan Programs Office within the Department of Energy has within its capacity to work with an entity like the CME "to establish physically cleared benchmark contracts in critical minerals and other novel commodities." They write: “Without mechanisms that help consumers and producers alike by stabilizing prices and providing hedges to producers, it is unlikely that we will see sufficient capacity built out to address our decarbonization needs. In liquid commodity markets like crude oil, the presence of market makers can help producers (and others across the value chain) use benchmark financial contracts to hedge away unwanted risk, and focus more closely on core competencies. Unfortunately, most critical minerals markets are not as mature. Hedging away price risk is costly, both financially and in time. Even when firms can hedge through long-term offtake contracts, they are imperfect at best. The environment for innovation is ripe—with the right policy, the federal government could secure greater production and increased capacity by acting to lower the costs and frictions that hinder producers looking to hedge price risk.” The whole proposal is worth reading. You often hear the word "financialization" used in a pejorative manner, when applied to certain aspects of the economy. But you can intuit why under-financialization, where players don't have the instruments to hedge their risks and ensure longer-term stability, is also problematic, particularly in this highly volatile, uncertain era of energy transition. Joe Weisenthal is the co-host of Bloomberg’s Odd Lots podcast. Follow him on X [@TheStalwart]( Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. [Bloomberg Markets Wrap: The latest on what's moving global markets. Tap to read.]( Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. Want to sponsor this newsletter? [Get in touch here](. You received this message because you are subscribed to Bloomberg's Five Things to Start Your Day: Americas Edition newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. [Unsubscribe]( [Bloomberg.com]( [Contact Us]( Bloomberg L.P. 731 Lexington Avenue, New York, NY 10022 [Ads Powered By Liveintent]( [Ad Choices](