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Opening Call:

Shares appeare to be headed lower at Thursday's open. Asian stock benchmarks declined, Treasury yields were mostly lower; the dollar weakened; while oil and gold fell.

Equities:

Stock futures point to a lower open in Europe on Thursday, tracking declines on Wall Street.

U.S. stocks finished sharply lower Wednesday, as tight races in midterm elections left control of the U.S. House and Senate up for grabs.

While markets were still digesting the outcome of the midterm elections, the bigger data point likely will be the U.S. CPI reading later today, BNY Mellon Investment Management said.

"October CPI will be very important and consensus is looking for another 'hot print' with some seeing year-on-year surging to 9%. This shows that many armchair economists simply draw lines on both growth and acceleration," said Tom Lee, head of research at Fundstrat, who added that he reckons the inflation number will come in softer than expected.

"All in all, this keeps us constructive on stocks into year end. And we think this rally will rise further and last longer than the 23 trading day rally following June pivot talk," Lee said.

Investors were also monitoring a fresh crypto wobble following news that Binance was walking away from a deal to acquire rival FTX, which has been hit by a liquidity crunch.

"What happens is that bitcoin holders invested in the stock market have to raise cash to meet margin calls," Dakota Wealth Management said, adding that the stock market gets further squeezed to the downside when coupled with selling tied to the midterm elections.

Forex:

The dollar weakened slightly in Asia, giving up Wednesday's gains.

"Red wave is more muted than expected, and the market is disappointed," Navellier & Associates said, referring to the midterm elections outcome.

Meanwhile, the yen strengthened against most G-10 and Asian currencies on risk-off sentiment spurred by developments including the rout in cryptocurrencies, analysts said.

Amid the risk-off mood, the U.S. October CPI data due later today would likely be the main market driver, IG said.

Previous months' track record of CPI outperformance and Cleveland Fed's estimates appear to suggest that upside risks to inflation remain on the cards, IG added.

Bonds:

Treasury yields were broadly lower ahead of U.S. CPI data.

The CPI report will return immediate focus to US fundamentals, FHN Financial said.

"Rather than analyze the headline and the core, we are paying most attention to total price inflation less energy (volatile) and housing costs, that are measured with notable lags. It is important to include food -- missing from the core, of course -- because 2022 demonstrates little correlation between food costs and raw commodities. Stubborn food inflation this fall is critical to the direction of Fed policy early next year."

The relative calm in the Treasury bond-market yield curve over the past 24 hours suggests this is a market that's processing and pricing in the midterm results, but really waiting to see what inflation data looks like tomorrow, BNY Mellon Investment Management said.

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U.K. short-dated bonds offer investors the best buy opportunity in more than a decade, AXA Investment Managers said.

Yields on the two-year U.K. government bonds were up to 3.252% at Wednesday's close from 0.680% at the start of 2022, according to Tradeweb.

"UK short-dated bonds have repriced to levels not seen for more than 10 years--presenting a compelling entry point to the asset class," it said.

"Investors today can get the kind of yield they would have got a couple of months ago from high yield bonds, which have much lower credit quality."

Energy:

Oil futures declined early Thursday, as worries over Chinese demand weighed.

These concerns come from rising Covid-19 cases in China, CBA said.

New infections in Beijing climbed Wednesday, while the largest outbreak was in the city of Guangzhou, it noted, adding that there were fears Guangzhou may soon face a Shanghai-style lockdown if cases continue to increase.

Oil and gas prices have declined in recent sessions despite an OPEC+ output target cut that began in November and hopes for less restrictive Covid-19 measures in China.

So far, Beijing has shown no signs of loosening Covid-related restrictions, which has weighed on energy prices, Oanda said.

Metals:

Gold edged slightly lower in Asia ahead of the U.S. inflation report.

The precious metal could consolidate around the $1,700/oz level, Oanda said.

However, if the strong USD trade gains traction in the run up to tonight's CPI data, selling pressure on gold might target the $1,685/oz region, Oanda added.

Sharing a similar view, FXTM said, "gold may be exposed to renewed selling pressure if the data exceeds market expectations -- especially if speculation rises over the Fed firing another monetary policy bazooka down the road."

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Copper prices declined, in line with broad losses in base metals.

ANZ said the decline was likely a result of weak economic data from China, which has raised demand worries.

China's producer prices fell for the first time in almost two years, while the October auto sales data also showed a sequential drop. "Such data suggest growth is anaemic," ANZ said.

Sentiment was likely further dragged by calls from Chinese copper smelters to regulate capacity, which may further pressure demand, ANZ added.

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Chinese iron-ore futures gained, pulling back from a broad rally so far this month amid rising hopes for looser Covid curbs in China.

Yongan Futures pointed out that the steel-making raw material has likely hit its upper limit after strong gains in recent days.

Given iron ore's current elevated price level, steel producers' buying sentiment may be turning softer, it said.

Expectation of steel production restrictions in the winter further weighed on demand sentiment, Yongan added.


TODAY'S TOP HEADLINES

Biden Plans to Meet China's Xi and Discuss How to Avoid Conflict

President Biden said he plans to discuss how the U.S. and China can avoid conflict when he meets with Chinese leader Xi Jinping during his coming Asia trip, but won't make concessions on critical issues.

"What I want to do with him when we talk is lay out what each of our red lines are, understand what he believes to be in the critical national interests of China, what I know to be the critical interests of the United States, and to determine whether or not they conflict with one another," Mr. Biden told reporters in Washington. "And if they do, how to resolve it and how to work it out."


Control of Congress Remains at Stake as Democrats Fend Off Anticipated 'Red Wave'

Republicans were picking up seats and headed toward an expected House majority as of late Wednesday, but the Senate remained undecided amid signs the GOP gains were narrow and Democrats had fended off the midterm "red wave" that many had anticipated.

The results of Tuesday's elections revealed voter anxiety over the highest inflation in four decades, the state of the nation, abortion access and crime. The voting also showed the electorate remains polarized following a tumultuous few years marked by political upheaval, economic uncertainty and a global pandemic.


Binance Walks Away From Deal to Rescue FTX

Crypto exchange Binance reversed course on a rescue offer for FTX Wednesday, leaving the prominent digital firm with an uncertain future as it faces a shortfall of up to $8 billion, according to people familiar with the matter.

Binance chose not to go ahead with the nonbinding offer following a review of the company's finances, the exchange said. "In the beginning, our hope was to be able to support FTX's customers to provide liquidity, but the issues are beyond our control or ability to help," Binance said in a statement.


Fed shouldn't back off rate hikes for fear of a downturn, Barkin says

The Federal Reserve shouldn't stop raising interest rates for fear of a recession, said Richmond Fed President Thomas Barkin on Wednesday.

"If there is one thing we learned in the 1970s, it is that the Fed can't let inflation fester and expectations rise. If we back off for fear of a downturn, inflation comes back even stronger and requires even more restraint," Barkin said, in a speech to the Top of Virginia Chamber of Commerce at Shenandoah University in Winchester, Va.


U.S. inflation likely to post another sharp increase in October, CPI to show

Inflation in the U.S. likely rose sharply again in October, but the latest look at the cost of living might also show a few signs of easing price pressures.

Here's what to watch in the consumer price index on Thursday morning.


Credit Suisse Faces Fresh Pressure Over Untaxed Americans

Credit Suisse Group AG pleaded guilty in 2014 to conspiring to help thousands of Americans cheat on their taxes. Eight years later, a set of problematic customer accounts still haunts the bank.

U.S. Justice Department officials have found deficiencies in the bank's handling of its 2014 plea agreement, according to people familiar with the case. In a sign of the seriousness the bank places on the tax case, new general counsel Markus Diethelm attended recent meetings with the DOJ to give personal pledges toward reaching a resolution.


U.S. Refuses Advanced Drones for Ukraine to Avoid Escalation With Russia

WASHINGTON-The Biden administration won't give Ukraine advanced drones despite pleas from Kyiv and a bipartisan group of members of Congress, a reflection of the limit of the kinds of weaponry Washington is willing to provide for Ukraine's defense.

(MORE TO FOLLOW) Dow Jones Newswires

11-10-22 0019ET