MARKET WRAPS
Watch For:
EU business & consumer surveys; Germany provisional CPI; Italy PPI; UK money and credit data; Bank of England governor appears before Lords Committee; trading updates from Schneider Electric, Exor, Infineon, Siemens Healthineers, AXA, easyJet, Yandex, Autoliv
Opening Call:
Shares may inch higher at Tuesday's open, after sentiment improved in Asia as traders digested more news out of China. Asian stock benchmarks were mostly higher as China and Hong Kong stocks rebounded; Treasury yields rose; the dollar weakened; while oil and gold gained.
Equities:
European stocks could open slightly higher after Chinese stocks led a rebound in Asia, as Chinese authorities tightened controls in reaction to protests against the country's zero-tolerance approach to Covid.
"I just don't think [authorities] will want to look as though they are backing down in response to protests," said Hargreaves Lansdown. "If you keep having rolling lockdowns, consumer demand will be dented, there will be an ongoing effect on supply chains...and there could be a drop in demand for key commodities."
Hawkish comments from Federal Reserve officials about the path of interest-rate increases could also damp market sentiment. New York Fed President John Williams on Monday said "there is still more work to do" to bring down prices. St. Louis Fed President James Bullard also discussed elevated rates moving forward.
Investors are awaiting the Labor Department's November jobs data to be released Friday, which will likely factor heavily into the Fed's December interest-rate decision.
Forex:
The dollar slipped on increasing risk-off sentiment, as tighter security in China aided in restraining large-scale protests from materializing.
"The absence of any clear escalation in protests could aid to bring some calm to markets," IG said.
However, risks point both ways as rising Covid case numbers in China and consequent supply disruptions speak to persistent inflation, while oil prices have come off a long way, ANZ said.
"All of this speaks to ongoing volatility in the lead up to the December Fed meeting, and as we navigate a host of US data releases later this week," ANZ added.
Meanwhile, the risks for sterling are "skewed to the downside" as the U.K. is struggling with a "toxic mix" of double-digit inflation and close to zero growth, UBS said.
Despite the Bank of England's efforts to control inflation with higher interest rates, investors are unlikely to be drawn in further by sterling, UBS said. "A sustained recovery in sterling is only likely when inflation pressures ease."
Bonds:
Treasury yields rose, as China's Covid-19 unrest raised concerns about global economic growth, but appeared to do little to inspire substantial and lasting moves in U.S. Treasurys.
Investors in government debt are weighing the next move from the Fed.
Likely offsetting some of the decline in yields was news that the U.S. festive shopping season had gotten off to a strong start, suggesting there was little evidence to date that consumers are reining in spending despite the Fed's attempts to cool the economy.
Markets were pricing in a 75% probability that the Fed will raise interest rates by another 50 basis points to a range of 4.25% to 4.5% on Dec. 14, according to the CME FedWatch tool. The central bank is mostly expected to take its fed-funds rate target to at least 4.75% to 5% by March.
Later in the week, however, investors will focus on economic reports, including home prices data and a consumer confidence index on Tuesday; the ADP employment report, the revision to third quarter GDP and the Fed's Beige Book on Wednesday.
Energy:
Oil prices gained in Asia, reversing earlier decline as traders digested more news out of China and the prospect of OPEC+ supply cuts.
"China markets are perking up to new housing support, a potential rate cut, and speculation that protests may expedite a shift from Covid-zero policies," SPI Asset Management said.
Meanwhile, Russia's meeting with members of the Opec+ group to discuss production policy early next month will also be in focus.
This sets up "a crucial week for the oil market as headline risk is bound to keep traders hopping," said SPI Asset Management.
Metals:
Gold prices edged higher early Tuesday ahead of this week's U.S. economic data, which would offer clues on the Fed's next move on interest rates.
"Interest rate speculation in the U.S. may play a bigger role on the metals market this week than most other fundamental currents," said DailyFX.
Oanda sees support for the precious metal at $1,730 and resistance at $1,780.
If mass tensions in China continue to escalate, Insignia Consultants expects to see gold "rise and rise," as people in China "hoard" the precious metal.
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Copper rebounded after steep declines in the previous session amid Covid-19-related protests in China.
The protests have created some uncertainty over how China will reopen to the outside world, which will affect demand for the metal, ANZ said.
Investors are likely to focus on signs that protests are escalating, or if the situation will be brought under control.
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Chinese iron-ore futures rose on reports that authorities have stepped in to curb the protests in several Chinese cities.
Sentiment was also buoyed by recent government measures to support the country's beleaguered real-estate sector, ANZ said.
Historically low inventory levels of the raw material and restocking needs heading into winter may also offer support to iron-ore prices, Donghai Futures said.
TODAY'S TOP HEADLINES
Fed's Williams Says Inflation Fight Could Last Into 2024
A senior Federal Reserve official said he expects inflation pressures to recede over the next year but cautioned the central bank will continue to have its work cut out because prices may decelerate to levels still above the Fed's 2% target.
New York Fed President John Williams also said the risks of a recession were elevated because the central bank has had to raise rates rapidly to combat high inflation.
European Differences Over a Russian Oil Price Cap Persist
European Union officials once again failed to agree to the terms of a price cap on Russian oil sales, with negotiations over the details of the unprecedented sanctions program continuing with a week left to implement it.
The European Commission, the EU's executive arm, proposed setting the price cap at $65 per barrel during talks on Monday, according to diplomats, three of whom said EU officials suggested the figure could be cut to $62 per barrel.
Biden Calls on Congress to Pass Legislation to Avert Rail Shutdown
WASHINGTON-President Biden called on Congress to pass legislation that would avert a rail shutdown by imposing a proposed contract that members at four railroad unions had rejected.
The move would cut short a long-running labor dispute between the country's biggest freight railroads and more than 115,000 workers that threatens to hurt the economy and disrupt the flow of goods as soon as next week.
China Clamps Down on Protesters Against Zero-Covid Policies
Chinese authorities tightened controls in reaction to rare nationwide protests against the country's zero-tolerance approach to Covid, dispatching phalanxes of police to prevent fresh gatherings as state media reiterated support for leader Xi Jinping's stringent pandemic strategy.
Fighting Rages in Eastern Ukraine as Zelensky Warns of More Russian Missile Attacks
KYIV, Ukraine-Fierce fighting rumbled on in east Ukraine, as Moscow denied Kyiv's claims that Russia was preparing to abandon a nuclear-power plant in the country's south that it has occupied since March.
In the eastern Donetsk region, Russia is struggling to seize the city of Bakhmut and achieve a symbolic victory after being on the back foot for months. Recent successful Ukrainian offensives have returned most of the northeastern Kharkiv region and the key southern regional capital of Kherson to Kyiv's control.
Bridgepoint Weighs Acquisition of Energy Capital Partners
Bridgepoint Group PLC in London said it is evaluating a possible bid for Energy Capital Partners LLC, commenting after a report that the private-equity firm was negotiating a $1 billion purchase with the energy-transition investor.
In a statement citing media speculation on potential mergers and acquisitions, Bridgepoint confirmed that it is evaluating a number of possible strategic opportunities. The discussions, including those with Energy Capital Partners, remain at an early stage and may not result in a deal, Bridgepoint said.
Shell to Buy Biogas Producer in $2 Billion Deal
Shell PLC has agreed to buy a European producer of biogas for nearly $2 billion, the latest move by a major oil and gas company to push into renewable fuels.
The London-based company said Monday it would buy Denmark's Nature Energy Biogas A/S, which produces a renewable fuel called biomethane that can replace conventional natural gas in heavy road and marine transport, industry and heating. Nature Energy is Europe's biggest producer of biomethane from organic waste.
Iran Arrests Supreme Leader's Niece Amid Crackdown on Critics
Iran arrested a human-rights activist who is also the niece of Supreme Leader Ayatollah Ali Khamenei, according to her family, part of a growing effort by the country's regime to crack down on those who are critical of its response to a two-month-old protest movement.
Iranian authorities arrested human-rights advocate Farideh Moradkhani on Wednesday after she went to a prosecutor's office following a summons, her brother said over the weekend.
Google, iHeartMedia Pay $9 Million to Settle Deceptive Endorsement Claims
WASHINGTON-Google and iHeartMedia Inc. agreed Monday to pay $9.4 million to settle allegations by state and federal authorities that the companies used deceptive endorsements by radio personalities to promote Google's Pixel 4 phones.
(MORE TO FOLLOW) Dow Jones Newswires
11-29-22 0042ET
