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Need to Know: This ‘underappreciated’ black swan could bring fresh chaos to the global economy

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New week, same bounce. Stock futures point to fresh gains as investors grow optimistic that a bond rout is ending, and the Fed’s rate-hike plans will get pruned due to a global slowdown.

Of course, that optimism comes as discontent grows around the world from high commodity prices that have driven up food prices, crimped U.S. 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 Halley.

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 U.S., 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 largely 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 U.S. Chamber of Commerce, which showed summer electricity reliability risk and warned that the transition to clean energy was out of sync with realities.

U.S. Chamber of Commerce

And then there’s electric vehicles, of which there is 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.

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,
+2.90%

fell in premarket trade after the low-cost carrier agreed to a sweetened buyout from Frontier
ULCC,
+6.57%
,
spurning the increased offer from JetBlue Airways
JBLU,
+5.77%
.

Shares of Epizyme
EPZM,
-0.31%

rose 63% after French biotech Ipsen
IPN,
-2.90%

announced a deal to acquire the U.S. oncology drugmaker for around $247 million.

Chinese electronic component makers — BYD Electronic
285,
+14.85%

and AAC Technologies
2018,
+6.94%

among others — jumped in Hong Kong on optimism about potential new orders from Apple
AAPL,
+2.45%

in coming months.

Durable goods orders and pending home-sales are on tap this morning, 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

U.S. stock futures
YM00,
+0.28%

ES00,
+0.36%

NQ00,
+0.47%

are rising, with bond yields
TMUBMUSD10Y,
3.177%

TMUBMUSD02Y,
3.089%

also creeping higher.

Oil prices
CL.1,
+0.22%

BRN00,
+0.41%

are slightly lower as traders wait for this week’s OPEC meeting. Bitcoin
BTCUSD,
-0.13%

is holding just above $21,000.

The tickers

These were the most-searched tickers on MarketWatch as of 6 a.m. Eastern Time:

Ticker

Security name

TSLA,
+4.52%

Tesla

GME,
-4.80%

GameStop

AMC,
+3.49%

AMC Entertainment

NIO,
+4.47%

NIO

MULN,

Mullen Automative

AAPL,
+2.45%

Apple

AMZN,
+3.58%

Amazon

BABA,
+4.91%

Alibaba

NVDA,
+5.55%

Nvidia

EVFM,
+16.95%

Evofem Biosciences

Random reads

Sex-party planner, Killing Kittens, gets a new investor — the U.K. Treasury.

Four miles under the surface, A U.S. 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

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

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