MARKET WRAPS

Watch For:

Bank of America earnings

Opening Call:

Stock futures jumped on Monday, pointing to another day of outsize moves on Wall Street, as investors try to make sense of an unsettled economic outlook.

S&P 500 futures added 0.9%. Volatility struck the stocks benchmark last week--it slid 2.4% on Friday after a 2.6% gain Thursday, moves investors said underscored angst over a possible recession and the pace of interest-rates rises, rather than fundamental changes in the economy.

Up ahead, investors will parse earnings from Bank of America, Bank of New York Mellon and Charles Schwab before the bell. Some of the biggest U.S. banks reporting last week said they were nervous of a recession.

Global markets were broadly higher. Oil-and-gas stocks led the Stoxx Europe 600 up 0.5%, while in Asia the Shanghai Composite Index added 0.4% after Chinese President Xi Jinping's congressional speech.

Other Market Headlines:

-U.K. Government Bonds, Pound Rally on Expected Tax Rise

-Chinese Markets Mixed After Big Speech

-JPMorgan, Citigroup and Wells Fargo Prepped for Recession. What Will Bank of America Do?

Read more here.

Stocks to Watch:

Shares of Splunk were rising in premarket trading Monday after The Wall Street Journal reported that activist investor Starboard Value has a stake of just under 5% in the analytics and security software company and plans to push the company to take actions to boost its stock price.

Coming into Monday, the stock has fallen 39.3% in 2022 and nearly 55% over the past 52 weeks. Early Monday, shares rose 4.2%.

Read more here.

Forex:

The pound edged higher after Prime Minister Liz Truss's hastily appointed new Treasury Chief Jeremy Hunt pledges to backtrack on a large chunk of the recent plans for unfunded tax cuts, with a financial statement brought forward to today, but any gains may be limited, MUFG said.

"The pound has already fully reversed all of the losses following the mini-budget, which should limit further upside on the back of further government measures to regain market confidence in the gilt market."

MUFG said risks are more skewed to the downside for the pound especially against the dollar heading into year-end and the currency likely faces "another volatile week."

Bonds:

The yield on 10-year Treasury notes slipped to 3.966%, from 4.005% Friday. Yields have risen for 11 consecutive weeks, driven by signs that inflation is proving difficult to budge, making it likely the Federal Reserve will keep on aggressively raising rates.

In the U.K., bond yields tumbled on Monday ahead of a planned statement from new Chancellor of the Exchequer Jeremy Hunt laying out budget plans ahead of the Oct. 31 medium-term plan.

The yield on the 30-year gilt fell 36 basis points to 4.49%. Hunt gave a series of interviews over the weekend and he is expected to eliminate most of the tax cuts laid out in the mini budget.

Energy:

Crude futures rose more than 1% in Europe, with the PBOC's decision to hold its key policy rates steady seen as a signal that China's benchmark lending rate will also be held steady, potentially boosting demand for oil.

Read: China PBOC Holds Key Policy Rates; Likely Signals Same for Benchmark Rates

European natural-gas prices skidded 7% ahead of European Union proposals for policies to quash volatility.

ING said it expects very tight natural gas markets over the winter months, keeping prices in the eurozone at uncomfortably high levels.

Natural gas exports from Russia to the EU have been cut further and the sabotage of the Nord Stream 1 and 2 pipelines has created some fears regarding the safety of the gas pipelines from Norway, ING said.

Unfortunately, according to the latest weather analyses, the risk of a cold winter has risen. Moreover, because of the lack of natural gas imports from Russia, prices aren't likely to fall significantly in 2023.

Metals:

Base metals were mixed, with demand in Asia still weak, while gold futures edged higher.

Marex said that participation in Asian markets has remained low on weak macro sentiment. "Covid-zero policies are still in place, coupled with the dollar remaining strong and the still ongoing [China] National Congress are likely reasons keeping participants away for now."

Other Insight:

Chinese President Xi Jinping's Sunday speech opening the Communist Party congress dented hopes that policy makers will relax their zero-Covid approach soon, but his comments about economic development as a top priority suggest that policy may be eased if the economy continues to weaken, which would be positive for commodities, according to Commonwealth Bank of Australia.

"An economic recovery in China looms as a potential salvation for mining and energy commodity prices next year if policymakers relax their stance on China's Covid--zero policy," CBA said.

It highlighted industrial metals and iron ore as the commodities most likely to benefit from a meaningful reversal in the zero-Covid strategy, given that China accounts for such a substantial proportion of demand in those markets.


TODAY'S TOP HEADLINES


Goldman Plans Sweeping Reorganization, Combining Investment Banking and Trading

Goldman Sachs Group Inc. plans to fold its biggest businesses into three divisions, undertaking one of the biggest reshuffles in the Wall Street firm's history.

Goldman will combine its flagship investment-banking and trading businesses into one unit, while merging asset and wealth management into another, people familiar with the matter said. Marcus, Goldman's consumer-banking arm, will be part of the asset- and wealth-management unit, the people said.


Activist Investor Starboard Has Nearly 5% Stake in Splunk

Activist investor Starboard Value LP has a sizable stake in Splunk Inc. and plans to push the software maker to take action to boost its stock price, according to people familiar with the matter.

Starboard's stake is just under 5%, the people said. The hedge fund often targets software companies that could benefit from operational and margin improvements or be attractive takeover targets.


Rupert Murdoch Media Deal Would Elevate Son, Bet on Wisdom of Scale

Nearly a decade ago, Rupert Murdoch decided it was a sound strategy to split his media empire in two. Now, he wants to put it back together.

People familiar with Mr. Murdoch's proposal to reunite Wall Street Journal parent News Corp and Fox News parent Fox Corp. point to a number of differences-within the companies, the industry and the Murdoch family-between now and when they were split in 2013.


American Executives in Limbo at Chinese Chip Companies After U.S. Ban

SINGAPORE-American workers hold key positions throughout China's domestic chip industry, helping manufacturers develop new chips to catch up with foreign rivals. Now, those workers are in limbo under new U.S. export control rules that prohibit U.S. citizens from supporting China's advanced chip development.

At least 43 senior executives working with 16 publicly listed Chinese semiconductor companies are American citizens, according to an examination of company filings and official websites by The Wall Street Journal. Many of them hold C-suite titles, from chief executive to vice president and chairman.


Company Documents Show Meta's Flagship Metaverse Falling Short

Nearly a year after Mark Zuckerberg rebranded Facebook as Meta Platforms Inc. in a bet-the-company move on the metaverse, internal documents show the transition grappling with glitchy technology, uninterested users and a lack of clarity about what it will take to succeed.

While Mr. Zuckerberg has said the transition to a more immersive online experience will take years, the company's flagship metaverse offering for consumers, Horizon Worlds, is falling short of internal performance expectations.


Lyft Battles Gavin Newsom Over California Measure to Fund EVs

Lyft Inc. is leading the fight for a new green tax in California, pitting the ride-sharing company against the governor over who should pay for the shift to electric vehicles.

San Francisco-based Lyft is the biggest financier of efforts to pass a November ballot measure that seeks to make the wealthiest Californians pay some of the costs of transitioning to greener forms of transportation and fund wildfire prevention. Lyft and other supporters are proposing an additional 1.75% tax on income earned over $2 million for the next 20 years, arguing that more money is needed to engineer the state's shift to cleaner energy.


Credit Suisse to Pay $495M in US Settlement

Credit Suisse Group AG said Monday that is has reached a $495 million settlement with the New Jersey Attorney General regarding transactions related to its residential mortgage-backed securities business.

Under the agreement, the Swiss lender will make the one-time payment resolving claims made in 2013 by the eastern U.S. state that the company had made false and misleading statements about the quality of more than $10 billion of residential mortgage-backed securities.

The New Jersey Attorney General had alleged $3 billion in damages, Credit Suisse said.


Senior KFC Executives Opt for Retirement as Interest Rates Hit Pension Payouts

Rising interest rates are adding to companies' borrowing costs and triggering higher credit-card bills for consumers. At KFC, they are driving a turnover in senior management.

The Louisville, Ky.-based brand's U.S. chief operating officer, chief financial officer and national field operations director have all notified Yum Brands Inc., KFC's parent, that they will leave the chicken chain at the end of next month, according to company messages viewed by The Wall Street Journal.


State Department Urges Silicon Valley to Aid National Security Effort

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10-17-22 0535ET